LG Electronics Exceeds Expectations with Results... "Positive Outlook for 4Q as Well"

Record High 3Q Performance Achieved... Operating Profit Nears 1 Trillion
TV and Home Appliances Benefit from COVID-19
"Inventory Situation Improved Compared to Before... Expecting Good Results in 4Q as Well"

[Asia Economy Reporter Minwoo Lee] In the third quarter of this year, LG Electronics delivered results exceeding expectations, recording an operating profit close to 1 trillion KRW. Given its conservative inventory management, it is expected to maintain solid performance through the end of the year.

According to industry sources on the 10th, LG Electronics posted consolidated sales of 16.9196 trillion KRW and an operating profit of 959 billion KRW in the third quarter of this year. These figures represent increases of 7.8% and 22.7%, respectively, compared to the same period last year. Notably, the operating profit significantly surpassed the market consensus forecast of 849.9 billion KRW, marking the highest ever for a third quarter. Sungryul Kwon, a researcher at DB Financial Investment, explained, "The H&A division (home appliances) and HE division (TV), which have driven profits so far, saw increased earnings, while the MC (mobile) and VS (vehicle components) divisions, which had been recording losses, reduced their deficits. As a result, all major business units improved their performance compared to the previous year, the previous quarter, and estimates."

The HE division is estimated to have achieved sales of 3.669 trillion KRW and an operating profit of 328.5 billion KRW, representing increases of 14.3% and 14.1%, respectively, compared to the third quarter of last year. The rise in online sales due to increased indoor activities amid the COVID-19 pandemic improved profitability, and product portfolio enhancements also contributed positively.

The H&A division recorded sales of 5.931 trillion KRW and an operating profit of 682.4 billion KRW, marking increases of 11.3% in sales and a remarkable 59.1% in operating profit compared to the same period last year. Goh Jungwoo, a researcher at NH Investment & Securities, analyzed, "The increased interest in home appliances due to the impact of COVID-19 and the surge in sales of hygiene appliances were key factors."

The MC division also showed somewhat improved results, with estimated sales of 1.782 trillion KRW and an operating loss of 155.1 billion KRW. Sales rose 17.1% year-on-year, and the deficit narrowed by about 3.7%. The increase in shipments driven by the launch of budget smartphones was a major contributing factor. The VS division recorded sales of 1.642 trillion KRW and an operating loss of 63.9 billion KRW. The researcher explained, "The resumption of production by client companies (automakers) likely had a positive impact on the overall company performance."

Outlook for the fourth quarter also remains positive. Researcher Kwon stated, "The fundamentals of all business units are on an improving trend. In the past, LG Electronics often suffered from poor year-end performance due to inadequate inventory management, which led to inventory management costs. However, by conservatively managing distribution inventory for home appliances and TVs, it is expected that even typical year-end demand will enable the achievement of solid operating profits."