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(LEAD) LG Electronics' Q2 profit drops 12 pct on slow demand, high logistics costs

It 15:43 July 29, 2022

(ATTN: ADDS more details throughout; photo)
By Woo Jae-yeon

SEOUL, July 29 (Yonhap) -- LG Electronics Inc. on Friday said its second-quarter operating profit decreased 12 percent on-year amid rampant inflation that hurt consumer demand for TVs and other home appliances.

Its operating income came in at 792 billion won (US$609 million) for the April-June quarter, falling short of analysts' expectations surveyed by Yonhap Infomax, the financial data firm of Yonhap News Agency.

Revenue increased 15 percent from the year-ago quarter to 19.5 trillion won, the highest for a second quarter, thanks to robust sales of premium home appliances and auto parts.

LG said its TV business shrank for the three months ending in June, as marketing costs rose and people spent less time at home.

Its home entertainment sector reported an operating loss of 18.9 billion won, the company said, reflecting a rise in "marketing investments in response to intensified market conditions."

While overall consumer demand declined, the company said premium home appliances were still in high demand, especially in North America, and continued to deliver double-digit growth.

In the second half, the company said it will focus on "effectively managing marketing expenses and growing the premium TV segment, particularly around peak selling seasons including the FIFA World Cup and holidays."

This file photo provided by LG Electronics Inc. on Feb. 22, 2022, shows a digital billboard advertising LG OLED TVs at Times Square in New York. (PHOTO NOT FOR SALE) (Yonhap)

Analysts have painted a less rosy picture for LG for the remainder of the year, as pandemic-driven pent-up demand for TVs has lost steam and rate hikes in major economies to fight runaway inflation have weakened consumer spending power.

Also, high shipping costs amid supply chain disruptions are expected to continue to hurt the company's bottom line.

But LG's electric vehicle (EV) components business has greatly improved its performance on growing demand from customers, which include Mercedes-Benz AG and General Motors, and increased profitability.

The division logged 50 billion won in operating profit in the second quarter, turning a profit for the first time since LG entered the market in 2013, except for the fourth quarter of 2015.

Early this month, LG said it secured 8 trillion won (US$6.1 billion) worth of new orders for electric vehicle (EV) parts and solutions in the first half.

Sales of the EV components jumped 24 percent last year from a year ago despite a drop in car production amid the global chip shortage.

The company expected its accumulated order backlog to top 65 trillion won by the end of the year, up 8 percent from a year ago.

The headquarters of LG Electronics Inc. in Seoul (Yonhap)

jaeyeon.woo@yna.co.kr
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