Tech giant’s Q2 profit plunges 47% amid tariff pressures, sluggish demand

An LG logo flag hangs outside the company's headquarters in western Seoul. (Newsis)
An LG logo flag hangs outside the company's headquarters in western Seoul. (Newsis)

LG Electronics said Friday that it plans to expand its washing machine production to Mexico starting in September in response to ongoing uncertainty surrounding US tariff policies.

During a conference call following its second-quarter earnings announcement, the company addressed its production optimization strategy in light of potential trade policy shifts.

“If the mutual tariffs set to take effect on Aug. 1 are implemented, we will respond by expanding our production bases in both the US and Mexico,” an LG Electronics official said.

Regarding potential price adjustments, the company said it “will carefully assess changes in US tariff policy, competitor movements and other factors, and make pricing decisions in close consultation with (its) distribution partners.”

The company also mentioned that it is actively engaging in business discussions with various clients across multiple regions about data centers. Its order volume in the sector has already grown more than threefold on-year.

"While we cannot disclose details at this stage, we are advancing the sophistication of our cooling solutions to meet the diverse requirements of customers," an LG Electronics official said. "We have also established a regular consultative body with one of the global Big Tech firms to collaborate on a data center project, and in-depth discussions are currently underway."

The company further added, "Through the initiative, we are working on specific aspects such as high-efficiency data center cooling solutions and detailed specifications for coolant distribution units.”

On Friday afternoon, the company reported a steep decline in the second-quarter earnings, citing intensifying global competition and rising tariff burdens tied to shifting US trade policies.

The company posted 639.4 billion won ($463 million) in operating profit for the April-June period, down 46.6 percent from a year ago. Sales stood at 20.7 trillion won, marking a 4.4 percent on-year decrease.

The figures fell short of market expectations. According to data compiled by local market tracker FnGuide, analysts had forecast a second-quarter operating profit of 856.3 billion won and revenue of 21.5 trillion won for the tech giant.

LG attributed the earnings miss to a confluence of unfavorable factors, including weakened consumer demand across key markets, heightened tariff burdens stemming from changes in US trade policy, and escalating competition in its key business segments.

Rising logistics and operational costs also weighed on profitability, the company said.

Despite the challenging environment, three key divisions — Home Appliance & Air Solution, Vehicle Component Solutions and Energy Solution — achieved record-high quarterly revenue and profit.

The company's conventional home appliance business posted an operating profit of 439.9 billion won and sales of 6.6 trillion won.

The company credited its dual focus on premium products and competitive mid-range offerings.

The vehicle component division earned 126.2 billion won in operating profit and a record 2.85 trillion won in sales.

Backed by stable order backlogs, the unit is expected to maintain momentum into the second half by strengthening partnerships and focusing on operational efficiency.

The ES division, driven by strong demand for home air conditioners in Korea and growing opportunities in industrial and power-generation sectors, also witnessed all-time high second-quarter results, with operating profit reaching 250.5 billion won and sales at 2.64 trillion won.

Meanwhile, the company’s TV-centric Media Entertainment Solution division slipped into the red, reporting an operating loss of 191.7 billion won due to waning TV sales and increased marketing costs.

LG said that business-to-business operations — encompassing Vehicle Component and Heating, Ventilation and Air Conditioning units — grew 3 percent on-year to 6.2 trillion won in the second quarter. Its appliance subscription business also expanded, with revenue up 18 percent to 630 billion won.

“The areas, which we define as part of our ‘qualitative growth’ strategy, are key to LG’s portfolio transformation. They continue to demonstrate resilience and potential, even amid a challenging macroeconomic backdrop,” an LG Electronics official said.

Looking ahead, LG plans to boost profitability through expanded direct-to-consumer sales, enhanced cost efficiency and continued investment in high-growth business-to-business areas.

The company will also intensify its push into global South markets, particularly in India, and strengthen its webOS platform through broader content offerings.


yeeun@heraldcorp.com