Impact of U.S. Tariffs Becomes Pronounced... Operating Profit Halved Year-on-Year
Steady Performance in Portfolio Transformation Sectors
LG Electronics' operating profit for the second quarter of this year dropped to half the level of the same period last year. This is attributed to the increased tariff burden resulting from changes in U.S. trade policy, as well as the delayed recovery of consumer sentiment in major markets.
On July 25, LG Electronics announced that its consolidated operating profit for the second quarter of this year was KRW 639.4 billion, a decrease of 46.6% compared to the same period last year. Revenue was KRW 20.7352 trillion, down 4.4%. The operating profit margin was 3.1%.
Booth where LG Electronics showcased high-efficiency heat pumps optimized for the European region at 'ISH 2025,' the world's largest heating, ventilation, and air conditioning exhibition held in Frankfurt, Germany, in March this year. Photo by Yonhap News
◆ Impact of U.S. tariffs becomes significant = LG Electronics explained that these results were due to a combination of sluggish demand in major markets, the increased tariff burden caused by changes in U.S. trade policy, and intensified market competition, all of which have created an unfavorable business environment. Increased costs compared to the previous year, including logistics expenses, also had an impact.
By business division, the Home Appliance & Air Solution (HS), Vehicle component Solutions (VS), and Air Solution (ES) divisions saw both revenue and operating profit increase year-on-year. All three divisions achieved record-high second-quarter revenue and operating profit, and the Vehicle component Solutions division in particular posted its highest-ever results for any quarter.
The Media & Entertainment (MS) division, on the other hand, turned to a loss due to a decline in TV sales and increased marketing expenses. The advertising and content business based on the webOS platform continues to generate steady profits.
◆ Portfolio transformation results become visible = LG Electronics is focusing on achieving 'qualitative growth' through a transformation of its business portfolio. The three main areas are: ▲B2B (business-to-business) such as vehicle components and air solutions ▲Non-hardware (Non-HW) such as subscription services and webOS ▲Direct-to-consumer (D2C) sales through the official online store.
B2B revenue?including vehicle components, air solutions, parts solutions, and smart factory?reached KRW 6.2 trillion, up 3% year-on-year. Revenue from the home appliance subscription business increased by 18% over the same period to KRW 630 billion.
These businesses are areas where LG Electronics is concentrating its capabilities from the perspective of portfolio transformation, and the company explained that their continued growth despite an unfavorable business environment is significant. B2B is advantageous for expanding solution businesses and building entry barriers based on relationships with clients, as it has low demand and price volatility. Non-HW enables recurring revenue structures and high profitability, while D2C contributes positively to improving profit structures and enhancing brand value.
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