LG Electronics Operating Profit Surges on Sports Demand for TVs

LG Electronics Inc. (066570), the world’s No. 2 television maker, posted first-quarter operating profit that almost doubled analyst estimates as global sporting events spurred demand for large-screen sets with sharper displays.

Operating profit, or sales minus the cost of goods sold and administrative expenses, was 504 billion won ($489 million), compared with the 285.4 billion-won average of 26 analyst estimates compiled by Bloomberg. Net income, excluding minority interests, rose to 74.9 billion won in the three months ended March 31 from 24.2 billion won a year earlier, the Seoul-based company said today.

This year’s Winter Olympics and soccer World Cup have spurred TV sales and helped LG withstand stalling demand across the industry as it adds sets with flexible screens and ultra high definition technology. The rebound in its biggest business comes as LG benefits from lower manufacturing costs, releases new high-end smartphones and increases sales of household appliances and air conditioners.

“The TV business led its first-quarter earnings,” William Park, a Seoul-based Daewoo Securities Co.’s analyst, said before the earnings release. “Profits from TVs will remain strong well into the second quarter with Korean companies likely outperform their rivals.”

Shares of LG rose 2.9 percent to 71,000 won as of 1:49 p.m. in Seoul trading, while the benchmark Kospi index fell 0.3 percent.

China Mobile

LG’s mobile division posted an operating loss of 8.8 billion won in the three months ended March. The company shipped 12.3 million smartphones in the quarter.

State-imposed curbs on South Korean wireless operators are cutting high-end device growth at home, while LG is reshaping its strategy in China by scrapping sales of lower-priced smartphones as it struggles to compete with Lenovo Group Ltd. (992), Huawei Technologies Co. and Xiaomi Corp.

LG released its 5.5-inch 4G smartphone through China Mobile Ltd. in February to bolster sales through the world’s largest carrier.

LG was ranked fourth in the global smartphone market last year with a 4.7 percent share, according to data compiled by Bloomberg from researcher IDC. Samsung led, followed by Apple and Huawei.

The home-entertainment division, which makes TVs and accounted for about 36 percent of revenue last year, had an operating profit of 240.3 billion won in the quarter. LG plans to release 12 new TV models with ultra HD displays this year.

LG’s home-appliance division had an operating profit of 109.2 billion won.

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

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner, Aaron Clark

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