The Korea Herald


LG’s 2016 performance improves except for smartphone

By 줄리 잭슨 (Julie Jackson)

Published : Jan. 25, 2017 - 20:04

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LG Electronics on Wednesday announced its performance improved last year, although its mobile device unit performed worse than a year earlier. 

According to a regulatory filing, LG said it posted 55.4 trillion won ($47.5 billion) in sales and 1.34 trillion won in operating profit in 2016.

While its annual sales dropped 2 percent on-year, LG saw a 12.2 percent gain in its operating profit, owing to the largest-ever profits from its home appliance and TV businesses.

The company’s home appliance and air solution division recorded 1.33 trillion won in operating profit, due to high sales in premium products, it said. The home entertainment division led by the TV business recorded 1.24 trillion won of operating profit.

However, the second-largest electronics producer saw further operating loss in its mobile communications division, which is in charge of producing smartphones. 

The mobile communications division posted a total of 1.26 trillion won of operating loss last year, surging from a 119.6 billion won loss in 2015. It has remained in the red since the second quarter of 2015 due to continually poor smartphone sales.

The widened deficit of the mobile business is attributed to the low sales of its flagship smartphones including the G5, amid intensified competition in the market, the company said.

LG’s vehicle components division also posted a loss of 63.3 billion won, due to increased investments in new businesses. The vehicle components division’s sales showed a whopping 51.3 percent growth last year to 2.77 trillion won, as demand for infotainment components for cars rose significantly, the company noted.

“The company’s annual performance improved overall, thanks to the biggest-ever profit from the home appliance and TV businesses,” a spokeswoman at LG said. “It is unfortunate to see the widened deficit in the mobile unit, but we hope the latest V20 smartphone brings about a notable turnaround.”

There were speculations that the archrival of Samsung Electronics and the runner-up in the smartphone market might possibly pull out of its money-losing smartphone business. However, its CEO Jo Seong-jin dismissed the rumors at the Consumer Electronics Show in Las Vegas earlier this month.

“We believe many things have been settled as of last year and that we can expect a positive turnaround (toward profitability) next year,” Jo said.

In the fourth quarter alone, the Korean tech firm logged a 35.2 billion won deficit on a consolidated basis. The fourth-quarter sales edged up 1.5 percent on-year to 14.8 trillion won.

“Affected by seasonal factors, the fourth quarter usually shows poorer performances,” the spokeswoman said. “Low sales of air conditioners during winter and large marketing costs spent on major year-end discount events are primary reasons.”

LG forecasts growing demand for premium home appliances that are not only wirelessly connected but also energy efficient this year, therefore the company will focus on sales of its premium LG Signature series, while expanding its built-in appliance business.

The company is also seeking a turnaround in its smartphone business with the upcoming flagship smartphone G6 scheduled to be unveiled at the Mobile World Congress in Barcelona on Feb. 25.

“Consumers will not find ‘LG-ness’ in the new G6 smartphone,” an investor relations officer said in a conference call Wednesday. “Along with the G6, another lower-cost model will be rolled out this year, which will help raise profitability.” 

By Song Su-hyun (