LG Electronics Makes Surprising Performance in First Quarter

LG Electronics recorded surprising amount of operating profit (estimated value) that surpassed $436 million (500 billion KRW) in first quarter.

It is believed that both upswing of sales of premium household appliances such as OLED TVs and positive effect from exchange rate contributed in having LG Electronics’ operating profit surpass hugely over market’s expected value. There are positive predictions that believe that LG Electronics’ performance in second quarter will be its biggest value if positive effect from sales of its new-application Smartphone called G5, which was released at the end of last month, is added. This is the first time that LG Electronics announced its tentative performance and this indicates that it has recovered its confidence.

LG Electronics made an announcement on the 11th that it made $11.7 billion (13.3621 trillion KRW) and $441 million (505.2 billion KRW) in tentative sales and tentative operating profit respectively in first quarter from its head company and its affiliates. This performance is its biggest performance after 7 quarters since second quarter of 2014.

Although its sales decreased by 4.5% compared to first quarter of last year, its operating profit increased by 65.5%. Compared to previous quarter, its sales decreased by 8.2% while its operating profit increased by 44.8%.

LG Signature that is introduced by LG Electronics as a ultra-premium brand

Its performance in first quarter is higher than average predicted value (consensus) from stock industry. According to FN Guide, consensus of LG Electronics’ performance in first quarter has it that it made $12.3 billion (14.0818 trillion KRW) and $372 million (426.6 billion KRW) in sales and operating profit respectively.

Sales of premium household appliances such as OLED TVs that were released in first quarter helped LG Electronics to make better performance than expectations.

Out of all business headquarters, Home Appliances and Air Solution (H&A) Business Headquarters led first quarter performance. Sales volumes of premium household appliances such as Twin-Wash Washing Machine, Dios Refrigerator and others have increased in advanced markets such as the U.S. Operating profit of H&A Business Headquarters is about $297 million (340 billion KRW) and is estimated to be increased by more than 30% compared to first quarter of last year.

HE Business Headquarters made about $157 million (180 billion KRW) in operating profit due to increased sales volume of OLED TVs. It is believed that sales volume of OLED TVs is much higher than last year’s sales volume as OLED TVs have become a norm in markets. Shinhan Investment Corporation is estimating that about 900,000 OLED TVs will be sold this year, which is 190% increased compared to last year. TV business also had its profitability increase as price of panels decreased. Both HE and H&A Business Headquarters benefited from having their operating profits increase from effect of exchange rate.

It is seen that MC (Mobile Communication) Business Headquarters, which is responsible for cellphones, made loss in first quarter again and it is because it did not release any new products that received attention. Global sales of G5, which was released at the end of previous month, will be reflected starting from second quarter’s performance. Qualitative improvement in performance is expected. If G5, which is getting most expectation out of all Smartphones that were released by LG Electronics, continues to be successful, it is predicted that MC Business Headquarters’ loss will convert to surplus.

There will be more than double the amount of early supplies of G5 in South Korea than early supplies of G4. There are also predictions that think that 12 million G5s will be sold globally, which is more than twice the amount of G4 that was sold globally (5.5 million).

It is expected that sales of premium household appliances will continue to increase in first quarter. HE and H&A Business Headquarters will also continue their upward trend in first quarter. Because it is expected that demands for TVs will increase as ‘Euro 2016’ and ‘2016 Summer Olympics’ are set to start in June and August respectively, it is predicted that sales will increase in second quarter. Along with sales from washing machines and refrigerators, H&A Business Headquarters will also benefit from increased seasonal demands for air conditioners.

Followed by its announcement of tentative level of performance, LG Electronics is planning to announce detailed level of performance per business headquarters at the end of this month.

Staff Reporter Kwon, Kunho | [email protected]