Sales Revenue Drops by Half
As the Russia-Ukraine war has continued for over a year, it has been confirmed that the performance of LG Electronics' local subsidiary has been halved due to difficulties in normalizing factory operations and sales on site.
On the 20th, LG Electronics announced in its consolidated audit report that its Russian subsidiary recorded sales of 944.547 billion KRW last year. This is only half of the 1.8867 trillion KRW sales in 2021. LG Electronics' Russian subsidiary posted a net loss of 23.256 billion KRW last year, turning to a deficit. Although factory operations and sales have not normalized, labor costs and management and maintenance expenses continue to be incurred, inevitably damaging overall profitability. LG Electronics has a subsidiary producing and selling refrigerators and washing machines in the Luza area on the outskirts of Moscow, Russia. In Ukraine, there is only a sales subsidiary.
In March last year, LG Electronics stopped all shipments to Russia due to global maritime logistics disruptions caused by the Russia-Ukraine war. Even after one year, the suspension of shipments to Russia has not been lifted. As a result, the smooth supply of parts necessary for manufacturing products has also become difficult.
The disclosed business report clearly shows the direct impact of the Russia-Ukraine war. LG Electronics' sales in Russia and neighboring countries last year amounted to 1.3883 trillion KRW, about half of the 2.0335 trillion KRW before the war in 2021. Although Russia and its neighboring countries accounted for only 2-3% of total regional sales before the war, it was a rapidly growing market with an annual sales growth rate exceeding 20%.
Samsung Electronics, which held the number one smartphone market share in Russia, is in a similar situation.
Market research firm Counterpoint reported that Samsung's smartphone market share in Russia was 2% as of the end of last year. Before the war, Samsung Electronics' market share was 35%, ranking first. Samsung Electronics' Russian local subsidiary posted a net loss of 48.9 billion KRW as of the end of last year. It was a place that earned a net profit of 93.53 billion KRW in 2021 but turned to a deficit due to the war. Samsung Electronics also suspended shipments to Russia after March last year, resulting in factory operations and sales not functioning properly.
Korean companies facing difficulties operating local subsidiaries due to the prolonged Russia-Ukraine war also find it difficult to withdraw from the market. For political reasons, once a company withdraws from the market, re-entry becomes difficult in the future.
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