LG Electronics, Poised to Maintain Global No.1 Home Appliance Performance in Q2 Despite COVID-19 Impact

[Asia Economy Reporter Ki-min Lee] As the novel coronavirus disease (COVID-19) continues for a prolonged period, attention is focused on whether LG Electronics' home appliance division can maintain its position as the world's number one in the home appliance industry by surpassing the American home appliance company Whirlpool in the second quarter of this year.

According to a compilation of securities firms' reports published this month by financial information company FnGuide on the 4th, the average sales and operating profit of LG Electronics H&A (Home Appliance & Air Solution) Business Division for the second quarter of this year are 5.454 trillion KRW and 536.4 billion KRW, respectively.

Compared to the operating profit of 700 billion KRW recorded in the first quarter of this year or the second quarter of last year, this represents a decrease of about 200 billion KRW, approximately 30%, due to the impact of COVID-19 in the second quarter of this year. When the performance of home appliance companies for the first quarter of this year was announced, there was an analysis that major domestic and international home appliance companies would record the worst performance ever in the second quarter due to the impact of COVID-19. However, compared to other sectors severely affected by COVID-19, the home appliance industry has performed relatively well, and it is expected that LG Electronics H&A Business Division also succeeded in defending its performance. Previously, LG Electronics H&A Business Division recorded sales of 6.1028 trillion KRW and operating profit of 717.5 billion KRW in the second quarter of last year, and achieved sales and operating profit of 5.418 trillion KRW and 753.5 billion KRW, respectively, in the first quarter of this year.

In the home appliance industry, it is predicted that LG Electronics H&A Business Division's performance defense was supported by the influence of new home appliances such as clothing care devices and dryers, as well as the strong sales of air conditioners starting from June. This is because interest in hygiene has increased further due to the prolonged COVID-19 pandemic. Additionally, in Korea, an early heatwave arrived, and as meteorological observations predicted that this summer would record the highest temperatures ever, air conditioner sales increased compared to last year. An industry insider explained, "Due to the early heatwave, domestic air conditioner sales have exceeded last year's since June, and LG Electronics' air conditioner sales are the same."

Because of this, there are continuous forecasts that LG Electronics will maintain its number one position in performance by surpassing the American home appliance company Whirlpool again in the second quarter. Whirlpool recorded sales of 4.325 billion USD (approximately 5.2 trillion KRW) and operating profit of 260 million USD (approximately 316.9 billion KRW) in the first quarter of this year, trailing LG Electronics H&A Business Division by about 200 billion KRW in sales and 430 billion KRW in operating profit, respectively.

Moreover, Whirlpool traditionally shows improved performance in the second half of the year due to the Black Friday effect, where home appliances are sold at lower prices than in the first half. Especially in North America, where the sales ratio is high, tens of thousands of COVID-19 patients were reported daily throughout the second quarter, causing local home appliance stores to temporarily close for certain periods in the second quarter, which is expected to negatively affect Whirlpool. While Whirlpool's sales ratio in the United States exceeds 50%, LG Electronics H&A Business Division's U.S. sales ratio is about 20%.