LG Group headquarters in Yeouido, western Seoul (Newsis)
LG Group headquarters in Yeouido, western Seoul (Newsis)

LG Electronics' preliminary operating profit plunged nearly 50 percent in the second quarter from a year earlier, coming in below market forecasts as the South Korean tech giant grappled with US tariffs and weakening demand.

In its earnings guidance Monday, the company said it expects to post an operating profit of 639.1 billion won ($467 million) for the April-June period, marking a 46 percent drop from the same period last year. Revenue slipped 4 percent on-year to 20.74 trillion won.

The results also undershot the already lowered consensus forecast of 847 billion won in operating profit and 21.47 trillion won in revenue, according to estimates compiled by market intelligence firm FnGuide.

“Amid delayed recovery in consumer sentiment in key markets, adverse business environment continued due to tariff-related burdens from the shift in US trade policy in the second quarter and intensified market competition,” LG said in a statement.

LG explained that its flagship home appliance unit, along with its business-to-business segments — including vehicle components and heating, ventilation and air conditioning, or HVAC — managed to be profitable. But its media and entertainment unit, which includes TVs and the webOS platform, weighed down overall earnings due to rising liquid crystal display panel prices and increased marketing expenses from intensified competition.

The company added that US tariffs as well as steel and aluminum-related duties and logistics expenses affected profitability.

In April, US President Donald Trump imposed a 10 percent tariff on all imports effective immediately, separately from his country-specific "reciprocal" tariffs that were delayed by 90 days until July 9. While LG manufactures washing machines and dryers at its US plant, the bulk of the company’s key appliances sold in the American market are still produced overseas, including in South Korea, Mexico and Vietnam, which are all subject to duties.

LG’s heavy dependence on the US market, which accounts for roughly 30 percent of its home appliance sales, leaves the company particularly vulnerable to such tariffs, according to industry analysts. The financial hit was further exacerbated in late June, when the US expanded 50 percent steel tariffs to cover washing machines, refrigerators and other household appliances containing steel components.

During the first-quarter earnings call in April, LG said it was considering price hikes for certain products and shifting production of some home appliances to the US in response to the new tariffs.

Looking ahead, LG said it plans to focus on its B2B segment in the second half, particularly in HVAC systems and automotive components. The company has been putting all-out efforts into expansion of its HVAC operations, recently signing an acquisition deal with Norwegian hot water solutions provider OSO Hotwater as part of its push into the fast-growing HVAC market.

LG is scheduled to release its full financial results, which includes net earnings and performance breakdowns by business division, on July 25.


sahn@heraldcorp.com