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LG Electronics expects Q1 profit to drop 11% despite robust sales

By Jie Ye-eun

Published : April 5, 2024 - 14:44

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LG Electronics' headquarters in Yeouido, western Seoul (Newsis) LG Electronics' headquarters in Yeouido, western Seoul (Newsis)

LG Electronics said Friday it expected its first-quarter operating earnings to decline more than 10 percent on-year despite the company strong overall sales of its home appliances.

LG estimated that its operating profit for the January-March period came in at 1.33 trillion won ($983.2 million), down 11 percent from a year ago, according to the company’s earnings guidance. But this was still above the consensus of 1.28 trillion won predicted by local analysts, as provided by the market intelligence firm FnGuide.

Sales were expected to have increased 2.2 percent on-year to 21.09 trillion won, which would be a first-quarter record for the company. The sales estimate was slightly lower than the consensus of 21.25 trillion won projected by FnGuide.

Meanwhile, the data for net income was not available for Friday’s earnings guidance.

The home appliance maker said the operating profit for the January-March period fell due to rising material costs and intensifying market competition. The amount, however, surpassed the 1 trillion won mark for the fifth consecutive year since the first quarter of 2020, the company added.

LG attributed the highest first-quarter sales result to its new business strategies, such as subscriptions and expanded business-to-business models. They have become the company’s key driving forces in overcoming uncertainties such as delays in market demand recovery.

Diversifying its home appliance product lineups, including the robust global sales of its premium OLED TVs also boosted the company’s overall sales for the January-March period, the company explained.

LG plans to accelerate the shift in the home appliance paradigm by expanding its subscriptions business, which allows customers to select desired home appliances and services, and will pursue the development of "affectionate intelligence” home appliances that can provide differentiated experiences to its customers.

LG Electronics CEO Cho Joo-wan redefined AI as "affectionate intelligence" during the company's self-promotional presentation in Las Vegas a day before the CES 2024 in January.

For its other key vehicle component solutions business, LG seeks to focus on the automotive infotainment sector, which accounts for the largest portion of sales, and seek product expansion throughout the year, alongside securing software capabilities.

The company will also pursue a dual-track strategy from this year -- focusing on OLED TVs and premium LCD QNED TVs -- to increase competitiveness in the global TV market. LG also said it will also continue investment in promising business sectors to secure future growth engines.

The tech giant is set to release its final first-quarter earnings report later this month, providing further insights into its performance across key business divisions.