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“Double-digit growth of home appliances through the first half of next year … the battlefield turns into a surplus in the third quarter of next year”
LG Electronics’ operating profit in the third quarter of this year reached 1 trillion won and sales reached 17 trillion won, the highest ever recorded in the third quarter.
Televisions and household appliances sold better than expected, leading to better performance due to higher demand for potty and ‘zipcock’ due to the new coronavirus infection (Corona 19).
LG Electronics announced on the 30th that its operating profit was 959 billion won, an increase of 22.7% from the third quarter of last year, as a result of adding its management performance for the third quarter.
Sales reached 16,919.6 billion won, an increase of 7.8% compared to the same period last year.
Both sales and operating profit are record highs in the third quarter.
Sales were the second highest for the entire quarter after the fourth quarter of 2017 (16.96 trillion won).
Home appliances and TVs beat expectations, with operating profit in the two divisions reaching nearly KRW 1 trillion in Q3.
The Home Appliances Division (H&A) posted 6,155.8 billion won in sales and 6,715 billion won in operating profit.
At LG Electronics, new premium home appliances such as hair stylizers, dryers, dishwashers, etc., posted high sales and cumulative operating profit in the Home Appliance (H&A) sector exceeded 2 trillion won in Q3.
Previously, the annual operating profit was less than 2 trillion won, but this year it has already earned more than 2 trillion won in the third quarter.
This is the result of the home appliance market, which was slow as a result of the crown lock (movement restriction) in the first half, and led to a demand for ‘spent’ thanks to the payment of crown subsidies from countries such as United States in the third quarter.
The H&A division’s third-quarter operating margin was 10.9%, registering double digits for the third consecutive quarter since the first quarter of this year.
This is the first time that the third quarter operating margin has registered double digits.
In the TV (HE) division, premium TVs like OLED and Nano Cell were good, with sales of KRW 3669.4 billion and an operating profit of KRW 32.6 billion.
While rising LCD panel prices were a drag, LG explained that increased demand for ‘Zipcock’ and decreased marketing costs due to increased online (non-face) sales due to Corona 19 had an effect on improving earnings.
Achilles Heel of LG Electronics, Mobile (MC) and the Electrical Equipment Division (VS), also dramatically reduced their losses in the third quarter.
The MC mobile division’s operating loss was 144.8 billion won, an improvement of more than 50 billion won compared to the second quarter (-26.5 billion won).
This year’s new velvet launch and sales of mid-range and low-end products in the United States and other countries rebounded, causing the deficit to decrease.
Due to Huawei’s sanctions by the United States, some gains reflected in Central and South America were also enjoyed.
In a conference call, the company said, “Competition between companies trying to fill an empty seat due to Huawei sanctions is getting fiercer, and little impact is expected in the United States, Korea and Japan.” With a new form factor ahead, we will be targeting Huawei’s vacancy. “
The electrical equipment (VS) division, which produces auto parts, posted a loss of 222.5 billion won in the second quarter, but significantly cut the loss to 66.2 billion won in the third quarter.
It was helpful that the operations of global automakers, which had been sluggish in the first half of the year, normalized in the third quarter and led to an increase in car sales.
The BS (Business Solutions) business unit posted an operating profit of 77 billion won due to the expansion of remote demand due to Corona 19.
LG Electronics has generally shown “high, low” performance that worsens towards the end of the year, but this is expected to break this flow.
There are also observations that it will reach the highest level of performance in history thanks to increased demand for home appliances and televisions and the expansion of online sales.
KB Securities estimates that LG Electronics’ operating profit for the fourth quarter of this year was KRW 5.516 billion, 442% more than last year.
In a conference call, the company said: “There is a risk from the reproliferation of Corona 19, but through the expansion of non-face-to-face trends, continued growth in online sales and efficient management of resources, we will be able to show a significant improvement on the prior year’s performance in the fourth quarter. “
Regarding the fact that the TV business is less profitable than Samsung Electronics, the company said: “It is due to the difference in absolute sales and cannot be judged in just one quarter.” “As the Corona 19 situation is expected to continue into the first half of next year, long-term business results are expected. We are managing and strengthening our market dominance by increasing sales of premium products.”
He also explained that the share of online sales is expected to increase from 30% to 50%, further strengthening specialty online products and digital marketing.
The company forecast that the high growth and high profitability of the home appliance business, which showed a record performance in the third quarter, will continue into the first half of next year.
LG Electronics forecast that the electrical equipment business, which continued to lose money this year due to Corona 19, will turn black starting in the third quarter of next year due to improving market conditions.
In particular, it confirmed that it is developing a new light source to improve product competitiveness with Austrian car lamp manufacturer ZKW, which it acquired in 2017.
The company said: “Using our buying and selling capabilities, we are seeking new orders in the electrical equipment business through cooperation with related domestic companies.”
Increased marketing costs due to peak season sales competition at the end of the year and the reproliferation of Corona 19 in Europe and the US are expected to serve as variables for Q4 and next year’s earnings. .
LG Electronics said: “Based on the heightened awareness, we will make more efforts to launch a variety of products in a timely manner to meet consumer trends and demands and maintain profitability in response to rising marketing costs.”
Next year’s Capex investment is expected to be in the mid-range of 2 trillion won, similar to this year.
/ yunhap news
