[Asia Economy Reporter Ki-min Lee] LG Electronics announced a surprise earnings report for the first quarter. Despite the economic downturn caused by the COVID-19 pandemic, sales of home appliances are estimated to have increased significantly.
On the 7th, LG Electronics reported consolidated sales of 14.7287 trillion KRW and operating profit of 1.0904 trillion KRW. Compared to the same period last year, sales decreased by 1.2%, while operating profit increased by 21.1%.
This is a surprise performance that far exceeded the average operating profit forecast (consensus) of 870 billion KRW presented by securities firms over the past month. It is the first time since the first quarter of 2018 that LG Electronics' operating profit has exceeded 1 trillion KRW.
The financial investment industry views the home appliance business division (H&A) and TV business division (HE) as the main drivers of the first-quarter performance.
Due to COVID-19, home appliances with sterilization functions such as stylers, air purifiers, air conditioners, and dishwashers performed better than expected. In particular, styler sales in February increased by more than 30% compared to the same period last year. Sales of air purifiers and dishwashers also reportedly increased significantly compared to the previous year.
In the TV business division, panel prices rose due to production disruptions at Chinese TV set manufacturers, but LG Electronics is believed to have benefited indirectly. Additionally, strong sales of organic light-emitting diode (OLED) TVs and the effect of new models contributed to relatively favorable results. Furthermore, reduced marketing expenses due to the COVID-19 impact are also estimated to have positively influenced the performance.
Regarding the smartphone division (MC), it is evaluated that supply disruptions caused by Chinese original design manufacturers (ODM) inevitably led to deficits.
Moreover, in the automotive components business division (VS), sales of internal combustion engine parts remained steady, but due to the global downturn in the automobile industry, poor performance continued, and operating losses likely persisted in the first quarter.
Experts analyzed that the consolidated performance of LG Innotek reflected favorable effects from increased supply of camera modules for iPhones and the weak Korean won.
However, since the spread of COVID-19 has not been contained in Europe and the United States, problems are expected to arise from the second quarter. It is known that the sales proportion of China, which suffered from COVID-19 in January and February this year, is about 5%.
In contrast, Europe and the United States, where COVID-19 is currently spreading, account for more than 30-50% of sales by division. Additionally, some overseas production facilities in Europe and the United States have suspended operations, and home appliance distribution channels are limited. Therefore, analysis suggests that poor performance in the second quarter is inevitable.
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