LG Electronics Posts Surprise Quarterly Loss on Currency

LG Electronics Inc. (066570), the world’s second-largest maker of televisions, posted an unexpected loss as a stronger South Korean won curbed the value of overseas sales and the company boosted promotion of the G2 smartphone.

The net loss, excluding minority interests, was 63.4 billion won ($59 million) in the three months ended Dec. 31, the Seoul-based company said today. That compares with the 156.6 billion-won average profit of 16 analysts’ estimates compiled by Bloomberg.

LG joins Korean exporters including Samsung Electronics Co. (005930) and Hyundai Motor Co. in posting quarterly profit below estimates amid a won that was the best-performing major Asian currency with a 2.4 percent gain against the dollar. The company boosted promotion of the G2 to win sales of more profitable high-end devices as cheaper panels for new, ultra high definition TV sets help it withstand sluggish global demand.

“TV did relatively well due to panel price falls, and the mobile business will show a gradual recovery,” said Yoon Hyuk Jin, a Seoul-based analyst at Eugene Investment & Securities. “Marketing expenses will continue to rise because of intensifying competition and as the high-end smartphone market is nearing maturity.”

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Operating income, or sales minus the cost of goods sold and administrative expenses, was 238.1 billion won in the fourth quarter. That beat the 210.8 billion-won average of analyst estimates.

Sales Forecast

The company booked a fourth-quarter loss of about 332.4 billion from currencies, foreign debt and tax, it said without elaborating. Hyundai cited the won on Jan. 23 when its profit missed analyst estimates, and the next day Samsung said gains in the South Korean currency cut 700 billion won from earnings.

Shares of LG fell 1.3 percent to 68,900 won at the close of Seoul trading, while the benchmark Kospi index fell 1.6 percent.

The company is targeting sales to rise 7.2 percent to 62.3 trillion won in 2014. The forecast for 2014 is 3.9 percent higher than analyst estimates.

LG’s mobile division, which shipped 13.2 million smartphones in the quarter, posted a second straight loss after boosting spending. The unit’s operating loss for the quarter was 43.4 billion won on sales of 3.59 trillion won.

To raise the profile of its brand, the company boosted promotion of the marquee 5.2-inch G2 handset, unveiled at New York’s Lincoln Center in August, as well as its first curved G Flex device introduced Oct. 29. The 6-inch G Flex is now available in Asia and will be released in the U.S. market through AT&T Inc. (T), Sprint Corp. (S) and T-Mobile US Inc. (TMUS) sometime in the first quarter.

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Lenovo, Huawei

LG slipped two positions to fifth in the global smartphone market in the third quarter with 4.6 percent of shipments as it was overtaken by Lenovo Group Ltd. and Huawei Technologies Co., according to data compiled by Bloomberg from IDC.

The company probably spent more than 200 billion won on marketing in the December quarter, said Greg Roh, an analyst at HMC Investment Securities Co. in Seoul.

The home-entertainment division, which makes TVs, had an operating profit of 174.3 billion won in the fourth quarter.

LG this month unveiled its first Web-connected TVs running on a software platform it acquired from Hewlett-Packard Co. last year. The redesigned platform, which was originally developed by Palm Inc., will feature in more than 70 percent of LG’s Internet-ready TVs this year, it said.

Separately, LG will also roll out 12 new TV models with ultra high definition display technology this year.

LG’s home-appliance division had an operating profit of 83.4 billion won on 2.84 trillion won of sales.

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The air-conditioning unit returned to an operating profit of 7.3 billion won on sales of 720 billion won.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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