LG Electronics Exceeds 1Q Expectations amidst Global Contraction
Company Reports Positive First Quarter Earnings Results on
Solid Performance of LCD TVs and Mobile Phones
LG Electronics, a leader in consumer electronics and mobile communications, announced unaudited consolidated earnings results of the three-month period ending March 31, 2009.
Commenting on this achievement, the Managing Director of LG Electronics Levant, Mr. Kevin Cha, said, “LG Electronics’ first quarter earnings are testament to the favorable reception of the Company’s products which appeal to consumers’ sense of beauty, innovation, and technology. These results are also attributed, in part, to LG’s astute business and marketing strategy, despite current economic difficulties. We constantly endeavor to enhance consumers’ lifestyles with outstanding products that positively affect their lives.”
Sales and Profit
In the first quarter of 2009, sales on a global basis including LG’s overseas subsidiaries soared 14.6 percent to USD 9.12 billion year-on-year. Operating profit saw USD 324 million resulting in a margin of 3.5 percent, 2.8 percent point higher than the previous quarter.
On a parent basis, the Company recorded sales of USD 5.02 billion, an operating profit of USD 310 million. Consolidated sales including affiliates rose 10.7 percent to USD 11.28 billion with operating profit of USD 83 million, for a margin of 0.7 percent, 1.5 percent point higher than a year earlier.
The Home Entertainment Company sales rose 18.6 percent to USD 3.05 billion and returned a profit of USD 10 million due to robust flat panel TV sales, especially LCD TVs, even during low season. Shipments rose 40 percent YoY to 3,538,000 units. The Company expects global demand in 2Q to be higher as demand for small flat panel TVs grows in emerging markets and developed markets look to purchase second units.
The Mobile Communications Company reported USD 3.02 billion in sales, 16.8 percent higher than the previous year, and operating profit of USD 181 million with a margin of 6.0 percent. Handset sales accounted for USD 2.78 billion, up 22.6 percent YoY and operating profit saw USD 187 million at a margin of 6.7 percent.
Sales remained strong in mid-tier models such as Cookie, a full touch screen phone, and LG-KS360, a QWERTY keypad messaging phone, among others. Shipments of handsets recorded a decline of 7 percent YoY and 12 percent QoQ to 22.6 million units due to seasonal effect and the global market contraction.
With the global economic downturn expected to continue, LG sees the global market declining over 10 percent YoY to around 260 million in the second quarter. LG is targeting over 10 percent growth QoQ by focusing on high-tier, feature-rich products such as Arena, with a new S-Class UI, messaging phones such as Xenon and Neon, Viewty Smart, an 8 megapixel camera phone and GD900, with a transparent keypad.
The Home Appliance Company reported an increase of 16 percent to USD 1.57 billion YoY. The currency impact resulted in sales declining on a USD base but growing for Korean Won. The business downturn in the housing market slowed down the pace of the current recovery of consumption of the home appliance products, but the Company’s product competitiveness led the operating margin successfully recovered from loss from a year earlier to USD 72 million. Looking at the second quarter, market demand is expected to shrink YoY due to the ongoing recession but the decline in the market will likely slow down.
The Air Conditioning Company saw sales rise 8.9 percent to USD 900 million YoY with USD sales declining but KRW sales increasing. Operating margin resulted in a profit of USD 43 million due to growth in premium models. Despite the global recession, the Company foresees sales growing in the second quarter due to the seasonal change.
The Business Solutions Company reported sales declining 6.6 percent YoY to USD 0.78 billion with operating profit recording USD 19 million. Demand withdrawal impact from global recession led to sales decline in monitors, commercial TVs for hotels and automotive products. The Company will focus on improving sales from new B2B channels targeting products including network monitors and Pro:centricTM Solution hotel TVs.
Financial Statement and Non-operating Items on a Parent Basis
The Company recorded a recurring profit loss of USD 102 million and net profit loss of USD 141 million primarily as a result of foreign exchange loss of USD 224 million and equity method loss of USD 150 million from overseas subsidiaries and affiliates. LG Display, in which LG Electronics has a 37.9 percent stake, booked an equity method loss of USD 64 million.
2009 2Q Business Direction and Prospects
With the start of the high season for air conditioners and introduction of new products in major categories, the Company expects the sales to expand over 10 percent QoQ.
