(2nd LD) LG Electronics Q2 net more than halves on money-losing mobile biz

(ATTN: UPDATES with more details, comments from paras 16-18; ADDS photo)
By Kim Eun-jung

SEOUL, July 30 (Yonhap) -- LG Electronics Inc. said Tuesday its second-quarter net earnings tumbled 67.5 percent from a year earlier as its sluggish smartphone business offset decent profits from its home appliance division.

The South Korean electronics maker posted 106 billion won (US$89.7 million) in net profits in the April-June period -- far below the average market consensus of 372 billion won.

Its operating earnings slipped 15.4 percent on-year to 652.3 billion won, while its sales rose 4.1 percent to 15.6 trillion won over the period, the firm said.

The mobile division logged an operating deficit of 313 billion won in the second quarter, increasing 54 percent from three months earlier and marking the ninth consecutive quarterly loss.

LG Electronics said the poor performance was attributed to increased marketing costs for its first 5G phone, V50 ThinQ, and lackluster sales of its flagship phones and low-end devices.

Although LG's first 5G smartphone was well-received in the domestic market since its launch in early May, it failed to provide strong momentum to help the mobile division make a turnaround in the second quarter.

The Korean phone maker launched the V50 in the United States in partnership with Sprint and Verizon in the last two months, but the initial response was lukewarm with the lack of 5G infrastructure in the nation.

"Marketing spending increased in the run up to the new phone release and one-off costs for moving the local production line to Vietnam hurt profitability," LG Electronics said in a release.

Its home appliance division's revenue rose 15.1 percent on-year to 6.1 trillion won in the second quarter, breaking the previous record high of 5.46 trillion won in the first quarter.

LG Electronics said brisk sales of products related to air quality, such as air purifiers, dryers and clothing-care home appliances, helped jack up its profitability.

"Strong growth in South Korea and solid sales in other major markets, including the United States and Europe and Asia, pushed up the overall sales of the home appliance division in the second quarter," LG said.

LG Electronics anticipated unfavorable market conditions in the third quarter amid the escalating trade tension between the United States and China and Japan's export curbs on South Korea, vowing to focus on its premium lineup and make cost-cutting efforts for its smartphone business.

Japan imposed stricter export regulations on key three materials used in chips and displays on July 4, and is set to remove South Korea from "whitelist" of trusted buyers as early as this week, which could affect a broader range of industries.

"While the domestic home appliance market is expected to show strong demand in the third quarter, the global market will face growing uncertainties," LG said. "The competition will get tougher as demand is stagnant in the off-season for major products."

For the smartphone business, LG Electronics said it would make efforts to expand sales of its 5G smartphone and budget lines, while completing the relocation of its Korean production line to Vietnam by the end of this year to reduce costs.

The firm plans to unveil a new smartphone with a dual screen in early September during a consumer electronics show in Germany, which is expected to come onto the market in October.

LG offered a detachable dual screen for V50 5G smartphone in the domestic market, which was seen as an answer to Samsung's foldable smartphone.

Samsung had planned to release the Galaxy Fold in April, but delayed the release to September as it took time to fix some durability issues on the new device.

"We will make a dual screen (smartphone) as LG's differentiated marketing strategy," an LG official said during a conference call. "The Vietnam factory will begin full production in September, which would be able to cut around 50 billion and 100 billion won of production costs and improve profitability in the second half."

To boost the flattening demand for TVs, the electronics maker said it will release of 8K OLED TVs and rollable TVs in South Korea later this year to target the premium segment.

Shares of LG Electronics fell 1.6 percent to 67,500 won on the Seoul bourse on Tuesday, underperforming KOSPI's 0.45 percent gain. The earnings results were released shortly before the market closed.

ejkim@yna.co.kr
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