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LG Electronics’ Q2 earnings better than feared

(Park Hyun-koo /The Korea Herald)
(Park Hyun-koo /The Korea Herald)

LG Electronics on Tuesday announced its preliminary earnings for the second quarter of this year, beating forecasts by market watchers over concerns about sales falls during the COVID-19 outbreak.

According to the earnings guidance, LG is expected to have posted 12.8 trillion won ($10.7 billion) in revenue and 493.1 billion won in operating profit for the April-June period.

The figures were down 17.9 percent and 24.4 percent, respectively, from a year earlier.

The second-quarter operating profit was nearly halved from 1.09 trillion won in the first quarter.

LG’s home appliances business accounted for about 40 percent of the company’s sales in the first quarter. The TV unit made up 20 percent.

Shutdowns of home appliance factories around the world and reduced shipments in the wake of the COVID-19 pandemic were assumed to have led to the decline in sales and profit, due to the firm’s heavy reliance on those products.

However, the operating profit was 14.2 percent higher than estimates by local securities brokerages. Some market watchers had projected the company would barely obtain 300 billion won in quarterly profit.

“Domestic sales of premium home appliances recovered in May and June, leading to the better-than-expected performance overall,” explained a company official.

Although the US was one of the hardest-hit markets for LG, the Korean company managed to maintain its leading position there, outperforming its local rival in home appliances, Whirlpool, according to financial analysts.

“Resumptions of major electronics retailers in the US and Europe and state relief funds helped recover consumer sentiment and eased worries about demand falls for home electronics,” said a report released by DB Financial Investment.

The home appliance and air solutions business is expected to post a double-digit growth in terms of operating income ratio in the second quarter, backed by strong sales of hygiene-related steam products amid the virus outbreak. The operating income ratio of the unit stood at 13.9 percent in the first quarter.

LG’s TV business is estimated to have declined in both sales and operating profit due to the absence of festive events such as the postponed 2020 Tokyo Olympics.

However, the financial industry forecasts that LG would have raised at least 2.2 trillion won in sales and 120 billion won in operating profit during the second quarter.

The company’s struggling mobile business is predicted to have fared better with the launch of the Velvet smartphone, compared to the first quarter.

Some financial reports estimate the mobile unit would surpass 1 trillion won in sales, while reducing operating losses by around 30 billion won from the previous quarter owing to decreased costs spent on marketing amid the COVID-19 lockdowns.

As of the first quarter, the LG mobile business had an operating loss of 237.8 billion won.

By Song Su-hyun (