[Asia Economy Reporters Kim Heung-soon and Jung Hyun-jin] LG Electronics recorded sales exceeding 18 trillion won for the first time ever in the third quarter of this year, driven by strong sales in its core home appliance division. However, operating profit nearly halved compared to the same period last year due to the inclusion of a recall provision for General Motors (GM) electric vehicles in the United States.
LG Electronics announced on the 28th that its consolidated sales for the third quarter of this year reached 18.7867 trillion won, a 22% increase compared to the same period last year. This is the first time LG Electronics' quarterly sales have surpassed 18 trillion won. Operating profit was recorded at 540.7 billion won, down 49.6% from the same period last year due to the provision. As of the third quarter of this year, cumulative sales and operating profit reached record highs of 53.713 trillion won and 3.1861 trillion won, respectively, up 32.1% and 4.7% from the same period last year.
H&A Division Surpasses 7 Trillion Won in Sales for the First Time
The Home Appliance & Air Solution (H&A) division led the performance with sales of 7.0611 trillion won and operating profit of 505.4 billion won. The sales figure is the highest quarterly amount ever and represents a 14.7% increase compared to the same period last year. This is the first time a single LG Electronics business division has exceeded 7 trillion won in quarterly sales.
LG Electronics explained that strengthening localization strategies based on product competitiveness and differentiated customer value was effective. Major markets such as North America, Europe, and Latin America showed double-digit growth compared to the same period last year. Additionally, sustained high interest in hygiene and health led to strong sales of steam appliances such as dryers, stylers, and dishwashers, and sales increased due to the popularity of the LG Objet Collection, a space interior appliance. Demand for premium appliances increased, boosting sales of new appliances and the LG Objet Collection, while the rental business also maintained steady growth.
The Home Entertainment (HE) division, responsible for TVs and other products, recorded sales of 4.1815 trillion won in the third quarter. This represents a 13.9% increase compared to the same period last year, marking four consecutive quarters with sales above 4 trillion won. Operating profit was 208.3 billion won. LG Electronics stated that premium products such as organic light-emitting diode (OLED) TVs and large-sized TVs continued to show remarkable growth due to increased premium demand in the global market, and NanoCell TVs also performed well. Shipments of OLED TVs, led by LG Electronics, doubled compared to the same period last year.
In a performance conference call, LG Electronics said, "OLED TV sales volume is achieving 100% of the plan as of the third quarter," adding, "There is a risk of decreased TV demand in the fourth quarter due to global economic uncertainties and the transition to 'With Corona' (gradual return to normal life), but we expect to easily achieve the annual target of 4 million units, which is double the previous year." They further noted, "In this case, the sales proportion of OLED TVs this year is expected to be about 32%, continuing an increasing trend from 24% last year."
LG Electronics has set plans to strengthen business competitiveness by focusing on customer value while coping with rising raw material prices, increased logistics costs, and global inflation concerns. The H&A division plans to actively promote its industry-leading position and differentiated product competitiveness. It also aims to maintain double-digit sales growth compared to the same period last year and secure stable profitability by strengthening localization strategies.
However, LG Electronics stated, "Recently, maritime and air freight rates have been hitting record highs daily, negatively impacting the profitability of the H&A division," adding, "Logistics costs have affected about 2% of sales compared to the previous year." They explained, "This situation is expected to last until the first or second half of next year, or possibly 1 to 2 years. We are responding by deploying temporary vessels with global shipping companies to reduce supply disruptions and minimizing the impact of rising logistics costs through global supply chain optimization."
The HE division expects marketing expenses to increase during the year-end peak season but plans to focus on cost reduction and increase the sales proportion of premium products such as OLED TVs and large-sized TVs to maintain sales growth and secure solid profitability. Global TV demand is expected to decline compared to the same period last year as the transition to 'With Corona' reduces the time people spend at home.
Regarding the ongoing power shortage in China since September, LG Electronics said, "Since mid-September, we have been asked to reduce daytime power usage at some HE division production lines in Guangdong Province. Therefore, LG Electronics has shifted daytime production to nighttime to avoid disruptions," adding, "We have established emergency response plans, including expanding self-generation facilities and controlling non-production power usage, to thoroughly respond to potential further deterioration."
Regarding Samsung Electronics' official announcement of launching Quantum Dot (QD) OLED TVs next year, LG Electronics commented, "Basically, the launch of a competitor's QD OLED creates a new form of competition, which we expect will intensify competition," but also noted, "On the other hand, the expansion of the OLED ecosystem is a positive factor for the market."
"Low Possibility of Automotive Division Turning Profitable in Q4"
The Vehicle Component Solutions (VS) division recorded sales of 1.7354 trillion won in the third quarter, a 4.8% increase compared to the same period last year. However, due to a recall provision of approximately 480 billion won related to GM, the division posted an operating loss of 537.6 billion won.
In the earnings conference call, LG Electronics stated that the possibility of the automotive division turning profitable in the fourth quarter is low. This is due to ongoing risks from vehicle semiconductor supply shortages and decreased demand for automotive parts caused by shutdowns at major automakers' factories. LG Electronics explained, "Due to the prolonged imbalance in semiconductor supply, global automaker production this year and next is expected to decrease by 10% compared to early-year forecasts," adding, "Issues with vehicle semiconductor supply and demand reduction due to production disruptions are expected to continue through the first quarter of next year, or at the latest, the second quarter."
The VS division plans to proactively respond to external environmental risks such as vehicle semiconductor supply issues and logistics disruptions, maximize sales, and improve profitability by focusing on supply chain management and efficient resource operation. Regarding the GM recall, LG Electronics said the final allocation of the provision with LG Chem will be determined in the future.
Additionally, the Business Solutions (BS) division recorded sales of 1.6899 trillion won, a 13.9% increase compared to the same period last year, but posted an operating loss of 12.3 billion won. LG Electronics explained, "Along with semiconductor supply issues, rising prices of key components such as LCD panels and wafers, as well as increased logistics costs, limited profitability improvement."
The B2B business faces cost burdens such as rising prices of key components and logistics costs but expects the information display market to gradually recover and demand for IT products to continue. Accordingly, it plans to optimize business operations centered on strategic products to maintain competitive advantages in the global market.
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