LG Electronics to Achieve Record High Performance in Its 65th Year This Year

Achieving Q4 Forecasts Could Lead to Record Annual Performance
Operating Profit in 2021 and Sales in 2022 Set New Records

Business Strategies Like Expanding Home Appliances and Automotive B2B Worked
Expectations High for Next Year's Performance... Automotive to Become Core Business

Since its founding in 1958, LG Electronics has experienced its best year ever. The company is on track to break its record for the highest performance in history. This year, LG Electronics is expected to achieve its best-ever results in both quantity (sales revenue) and quality (operating profit).

Cho Ju-wan, President of LG Electronics, speaking at a press conference unveiling the B2B business strategy at LG Science Park in Magok, Seoul, last July / Photo by LG Electronics

On the 31st, the average forecast from securities firms for LG Electronics' Q4 performance, compiled by financial information provider FnGuide, was sales of 23.1067 trillion KRW and operating profit of 883.7 billion KRW. Adding the results from Q1 to Q3 this year, the annual estimate stands at sales of 84.2304 trillion KRW and operating profit of 4.1197 trillion KRW. In this case, both the annual highest sales record of 83.4673 trillion KRW set in 2022 and the annual highest operating profit record of 4.058 trillion KRW set in 2021 will be surpassed. In other words, LG Electronics is poised to achieve the dual crown of highest annual sales and operating profit in 2023.

In 2021 and 2022, despite management difficulties due to the spread of COVID-19, demand for LG Electronics' core home appliances and IT devices increased as remote work and learning rose and more people spent leisure time at home. LG Electronics responded to this demand by adopting a premium strategy in its home appliance (H&A Division) business, achieving record-breaking performance at the time. In Q2 last year, the automotive components (VS Division) business posted its first-ever profit, strengthening its fundamentals.

This year, with the COVID-19 effect gone and market headwinds such as economic recession and interest rate hikes continuing, demand has frozen. However, LG Electronics has concretized a business strategy to heat up the market. The management focus has shifted from business-to-consumer (B2C) to business-to-business (B2B). Simply put, the company is competing by supplying parts to other businesses. At the same time, since October last year, it has operated a crisis management task force called the 'War Room Task,' focusing on improving business structure and profitability.

As a result, following its strong performance in home appliances, LG Electronics has grown automotive components into a new cash cow. The H&A Division expanded its B2B business in heating, ventilation, and air conditioning (HVAC) and built-in appliances by increasing the volume zone (the area with the highest consumer demand) of key products in Q3, recording operating profit of 504.5 billion KRW, about twice that of the same period last year. The HVAC business is currently benefiting from the recent trends toward decarbonization and electrification, increasing its revenue opportunities.

The VS Division, which focuses on B2B business, also posted a record quarterly operating profit of 134.9 billion KRW in Q3 due to increased orders and improved profitability. LG Electronics expects the VS Division's year-end order backlog to approach 100 trillion KRW and annual sales to exceed 10 trillion KRW. It also forecasts that the VS Division's profitability will improve further next year, stating that "it will soon become a core business leading the company's overall growth."

Securities analysts predict that LG Electronics will continue to deliver strong results beyond Q4 and into next year. Park Hyung-woo, a researcher at SK Securities, said, "After Q4, the peak season arrives," adding, "Year-end is the time to increase LG Electronics' weighting." Kim Rok-ho, a researcher at Hana Securities, predicted, "Despite this year's difficult environment, operating profit will increase by 40% compared to last year due to cost reduction effects," and "Next year, the VS Division's profit contribution will reach 14%."

LG Electronics plans to expand its B2B business by not only supplying specific products but also adding various solutions demanded by customers in adjacent product areas, creating growth opportunities through high value-added business. The company has set a goal to raise B2B sales to over 40 trillion KRW by 2030. At a press conference in July, Cho Joo-wan, President of LG Electronics, stated, "We will invest most of our funds in B2B," adding, "A significant amount will go into electric vehicle charging, automotive components, and robotics."