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(2nd LD) LG Electronics Q1 operating profit up 65.5 pct

All News 17:21 April 11, 2016

(ATTN: ADDS details throughout)
By Kang Yoon-seung

SEOUL, April 11 (Yonhap) -- LG Electronics Inc., South Korea's No. 2 tech giant, said Monday its first-quarter operating profit shot up 65.5 percent on-year, apparently driven by the improved sales of premium products.

Operating profit came to 505.2 billion won (US$440.7 million) compared to the 305.2 billion won posted a year earlier, the company said in its earning guidance report. Sales edged down 4.5 percent to 13.3 trillion won.

It marked the first time for LG Electronics to announce an earnings guidance for quarterly profits. The finalized report, including the net performances and breakdowns for each segment, will be delivered later this month.

The result hovered far above the market's estimates made earlier. According to data compiled by Yonhap Infomax, the financial arm of Yonhap News Agency, South Korea's 12 brokerage houses on average estimated LG Electronics' first-quarter operating profit at 433.5 billion won, up 42 percent from a year earlier.

The quarterly operating profit also marked the highest since the 609.7 billion won posted in the second quarter of 2014.

While LG did not reveal the performances of each segment, analysts said the improved earnings apparently came as the company expanded sales of premium products.

"The rising presence of premium models in TVs and home appliances sales led to the improved profitability," said Lee Jae-yun, an analyst at Yuanta Securities Co. "The falling prices of panels is presumed to have reduced production costs of TVs."

"The expanded sales of washers and air conditioners is also estimated to have lent support to the strong performance," Lee added.

LG Electronics also said the expanded sales of OLED TVs and falling display panel prices are presumed to have supported the "earnings surprise."

The mobile business, however, is presumed to have posted a shortfall in the January-March period. LG's mobile business had posted an operating loss of 43.8 billion won in the fourth quarter of 2015.

Industry watchers said the G5 smartphone, which went on sale at the end of March, is presumed to be more of a burden for the first quarter due to the marketing expenditures prior to full-fledged sales.

But analysts said the mobile business will post improved earnings in the second quarter on the back of the robust sales of the G5 smartphone.

The LG G5 saw its first-day sales reach 15,000 units in South Korea, hovering far above its predecessor, which managed to sell only around 5,000 units.

Industry watchers expect the combined global sales of the G5 to reach 10 million units, which will be equal to the G3 released in 2014.

The G5 smartphone, first introduced at the Mobile World Congress in Spain in February, is touted as the industry's first "Modular Type" smartphone, which connects with various accessories.

While the vehicle components business managed to post an operating profit for the first time in the October-December period last year, the segment is presumed to have posted a shortfall in the first quarter.

During the announcement of its earnings last year, LG said it will take two or three more years for the vehicle component business to post steady profits.

Shares of LG Electronics traded 0.94 percent higher at 64,300 won Monday, while the benchmark KOSPI edged down 0.09 percent. The earnings result was announced after the trading session.


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