April 27 (Bloomberg) -- LG Electronics Inc., the world’s third-largest maker of mobile phones, posted an unexpected second straight quarterly loss after a slump in handset sales and lower earnings from home appliances.
The first-quarter net loss was 15.8 billion won ($15 million), compared with 674.6 billion won profit a year earlier, Seoul-based LG said in a statement today. Analysts predicted profit of 56.6 billion won, based on the average of 11 estimates compiled by Bloomberg in the past 28 days. Sales were little changed at 13.2 trillion won.
The mobile-phone business posted a loss for a fourth straight quarter after LG’s Optimus smartphones failed to take market share from models by Apple Inc. and Samsung Electronics Co. LG is counting on smartphones and 3-D TVs to help Korea’s second-largest electronics maker to revive profitability.
“They don’t really have a business that can rise above others,” said Song Seong Yeob, a fund manager at Seoul-based KB Asset Management Co., which manages $21 billion in assets. “Their profit margin largely hinges on the handset business but I’m still not sure how well it will do.”
LG climbed 0.5 percent to 105,000 won at the 3 p.m. close of trading on the Korea Exchange, while the benchmark Kospi index was little changed.
Losses at units including LG Display Co. contributed to the net loss in the first quarter, LG said.
The company had an operating profit of 130.8 billion won, a 73 percent drop from a year earlier. The mobile-phone division had an operating loss of 100.5 billion won, as shipments fell 10 percent from last year, LG said.
“We still have many weaknesses,” Chief Financial Officer David Jung said at a briefing in Seoul. “We still have a long way to go.”
Sales and earnings will improve this quarter, as new smartphones and TVs featuring 3-D functions go on sale, and the handset unit may return to profit in the second half, he said.
LG expects smartphones to account for about 20 percent of its overall handset sales this year, as it aims to boost mobile-phone sales by 30 percent. The company will gradually reduce the number of unprofitable models this year, Jung said. A key new model to drive sales in the second quarter is the Optimus 3D, which is capable of recording 3-D images, LG said.
The company probably sold more than 2 million Optimus One phones in the first quarter, according to Daiwa Securities Group Inc. In November, the device became LG’s first smartphone to sell more than 1 million units.
The home-entertainment division that makes TVs had an operating profit of 82.1 billion won, falling from the 149.7 billion won profit a year earlier. Sales fell 4.8 percent after intensifying competition led the company to cut prices.
The recovery in spending on liquid-crystal-display televisions has been “particularly slow,” as the latest models equipped with 3-D functionality and Web-based services failed to generate fresh demand, James Song, an analyst at Daewoo Securities Co., wrote in a March 15 report.
The average price of flat-screen TVs in the U.S. fell for a third straight month in February as makers tried to clear inventory before rolling out new models, according to IHS ISuppli, a research company in El Segundo, California.
LG expects sales of its 3-D TVs to gain momentum from April as stores in the U.S. and major European markets start stocking its latest models, Havis Kwon, head of the company’s TV business, said April 6.
LG aims to boost its TV market share to 16 percent this year from about 12 percent in 2010 by introducing new models capable of showing 3-D images and connecting to the Web, Kwon said in February.
Profit at the home-appliance division fell 50 percent to 102.7 billion won, missing the 132.2 billion won median of five analyst estimates surveyed by Bloomberg News.
The profit decline stems from rising raw material costs and price cuts, Kim Ji San, an analyst at Kiwoom Securities Co. in Seoul, wrote in a March 24 report. The company’s plan to increase prices in the U.S. may help cushion the impact of costlier raw materials, he said.
LG may raise prices in some markets to reflect rising costs for raw materials, Jung said.
The company said in February that it will raise prices for major appliances by 8 percent to 10 percent in the U.S. from April 11. The electronics company aims to generate $20 billion in home-appliance sales in 2014 by pushing into new areas such as water treatment and built-in appliances, it said Jan. 11.