LG Electronics Profit Beats Estimates on TVs, Mobiles
LG Electronics Inc. (066570), the world’s second-largest television maker, reported first-quarter profit that exceeded analyst estimates as TV and smartphone sales led earnings gains at its main businesses.
The company had net income of 242.5 billion won ($213 million) in the three months ended March 31, compared with a loss of 15.8 billion won a year earlier, Seoul-based LG said in a statement today. The average of 20 analyst estimates compiled by Bloomberg was for a profit of 181.9 billion won.
Profit at LG’s home-entertainment unit was boosted by sales of high-end TVs featuring 3-D screens and Web-based services, while new devices using Google Inc.’s Android software helped the mobile-phone business return to profit. LG is racing to introduce new smartphones and TVs to narrow the gap with Samsung Electronics Co. (005930) and recover market-share losses in mobile phones to its South Korean competitor and Apple Inc.
“The TV side is improving a lot, nearly showing the best profitability ever, as their product mix is getting better,” Kim Ji San, a Seoul-based analyst at Kiwoom Securities Co., said by phone. “Investors have been the most worried about the mobile business, but profit is widening there, as well.”
LG fell 1.3 percent to 77,700 won at the close of trading in Seoul, after rising as much as 2.3 percent, while the benchmark Kospi index slipped 0.1 percent.
Operating profit more than tripled to 448.2 billion won even as sales fell 7.1 percent to 12.2 trillion won.
Profit rose 92 percent to 217.1 billion won at LG’s TV business and increased to 38.9 billion won at the mobile-phone division, compared with a loss of 100.5 billion won a year earlier.
LG is seeking to boost LCD TV sales by about 20 percent to 30 million units this year with models showing 3-D images and connected to the Web.
The company will likely sustain profitability at its TV business in the second quarter, as it offers more 3-D models, Chief Financial Officer David Jung said at a briefing. LG’s overall profit in the second quarter will probably remain similar to the previous three months or slightly decrease as marketing costs for new products increase, Jung said.
The company wants to become the largest seller of 3-D TVs this year by capturing about 25 percent of the market, with about 80 percent of new products to be sold in South Korea to have 3-D features, LG said in January.
LG also plans to start selling TVs using the organic light- emitting diode, or OLED, technology, which measures as thin as 4 millimeters and produces sharper images than LCD sets.
Such new models are helping the company increase profit from selling TVs at a time when Japanese competitors are mired in mounting losses and global demand is slowing.
Shipments of mobile devices in the first quarter fell 22 percent from the fourth quarter to 13.7 million units, LG said. Operating profit margins on mobile-phone sales still widened to 1.4 percent in the first quarter from 0.4 percent in the previous three-month period.
The company’s mobile-phone sales, including basic models, will probably decrease 18.4 percent this year, according to estimates by Kiwoom Securities Co. LG was overtaken by Apple as the world’s third-largest largest handset maker last year, according to estimates from market researcher Strategy Analytics.
To contact the reporter on this story: Jun Yang in Seoul at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Tighe at email@example.com
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.