Operating Profit Exceeds 1 Trillion in Q2
Home Appliances, Top Contributor to Record Performance
Auto Parts and Electric Vehicles Turn Profit Despite Chasm
LG Electronics has broken its record for the highest sales and operating profit for the second quarter in its history. This was thanks to its core business of home appliances and its future growth engine, the automotive electronics division, achieving the highest sales ever in a single quarter.
According to LG Electronics on the 26th, the company posted consolidated sales of KRW 21.6944 trillion and an operating profit of KRW 1.1962 trillion in the second quarter of this year. Compared to the same period last year, these figures rose by 8.5% and 61.2%, respectively. This is the first time the second-quarter operating profit has exceeded KRW 1 trillion.
The top contributor to this record performance was, as expected, the 'home appliances' segment. The H&A Business Division, responsible for home appliances, recorded sales of KRW 8.8429 trillion and an operating profit of KRW 694.4 billion in the second quarter. The operating profit is the highest ever for a second quarter. The volume zone strategy, which responded to market polarization by diversifying product lineups and price ranges to meet growing demand in emerging markets such as Latin America and the Middle East & Africa, was analyzed to have been effective. The success of new business areas such as subscriptions and online services also contributed to the strong performance. Last year’s annual subscription sales were KRW 1.1341 trillion, and this year it is expected to reach around KRW 1.5 trillion.
The VS Business Division, in charge of the automotive electronics business, also posted a profit despite the electric vehicle chasm (temporary demand stagnation). By actively responding to the increased demand for premium vehicle infotainment products and continuing growth, it recorded sales of KRW 2.6919 trillion and an operating profit of KRW 81.7 billion in the second quarter. The order backlog, which has accumulated to around KRW 100 trillion, is also evaluated as a factor that enhances earnings stability.
The sales of the home appliances and automotive electronics business divisions account for more than half of the company’s total sales. An LG Electronics official explained, "(This performance) is evidence that balanced growth between current core businesses and future businesses is being sustained," adding, "In particular, these businesses are driving qualitative growth based on profitability."
The HE Business Division, responsible for the TV business, also performed well. This was due to the recovery in sales of organic light-emitting diode (OLED) TVs, mainly in advanced markets such as Europe. However, operating profit slightly decreased compared to the same period last year due to cost increases such as liquid crystal display (LCD) panel prices. The HE division recorded sales of KRW 3.6182 trillion and an operating profit of KRW 97 billion in the second quarter.
The BS Business Division, responsible for monitors and signage, recorded an operating loss of KRW 5.9 billion despite sales growth, due to cost increases such as LCD panels and increased investments in growth businesses like electric vehicle charging.
LG Electronics is expected to post an operating profit exceeding KRW 1 trillion in the third quarter as well. According to securities firms’ consensus forecasts, the company’s third-quarter operating profit is projected to increase by 12.42% year-on-year to KRW 1.1204 trillion, and sales are expected to rise by 7.37% to KRW 22.2355 trillion.
Dongwon Kim, a researcher at KB Securities, said, "Following the second quarter, the achievement of an operating profit exceeding KRW 1 trillion is expected again in the third quarter, raising expectations for two consecutive quarters of earnings surprises," adding, "The sales growth rate of high-margin HVAC (heating, ventilation, and air conditioning) systems and home appliance subscription platform services is recording an annual average of 30 to 40%."
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