LG BRAVES POOR MARKET RUN FOR PHONES TO POST RECORD PROFITS

Solid Performance in Home Appliance and Home Entertainment Helps Offset Difficult Quarter in Mobile Phones

LG Electronics (LG) braved the continuing global recession to post a 46 percent increase in net profits for the second quarter of 2012 compared to the same period last year.

Despite the continuing recessionary conditions, LG’s operating profit in the most recent quarter increased significantly year-over-year. Stronger performance in home entertainment and home appliances compared to the second quarter last year helped offset profit declines in LG’s mobile business.

Solid performance in the company’s divisions of Home Appliances which covers products like washing machines, refrigerators and microwaves; and Home Entertainment which entails home theatres and televisions helped bridge a difficult quarter in Mobile Phones.

The company attributed the record performance to a combination of more premium products, strategic focus on developing markets and aggressive cost reductions.

The second quarter profits stood at USD 138.02 million while operating profit more than doubled to USD 302.95 million from the same period last year. Revenues, while 5.2 percent higher than in the first quarter, declined from last year’s second quarter by 10.6 percent to USD 11.16 billion largely due to declining feature phone sales and weak demand for IT products.

“Continued consumer confidence in our products can be said to be a key attribute to LG Electronics’ sustained growth. We will continue innovating to offer the best solutions for a fast changing market situation,” said LG Electronics Managing Director for East and Central Africa Mr. Josep Kim.

LG Home Entertainment Company posted significantly improved operating profit in the quarter compared to the same period in 2011. Due in large part to an increase in sales of more premium products and improved supply chain management, operating profit more than doubled to USD 187.5 million year-over-year. Sales declined 5.8 percent from the same period a year ago to USD 4.76 billion but increased 2.8 percent from the first quarter of 2012. LG’s popular CINEMA 3D TVs will continue to drive sales in the second half as it pushes ahead to become the top global seller in the 3D segment.

LG Mobile Communications Company, after a positive first quarter, struggled in the second quarter with an operating loss of USD 49.48 million mainly due to greater marketing expenses related to new model launches in the quarter. Overall revenues declined 28.5 percent year-over-year to USD 2.01 billion as a result of shrinking feature phone sales but smartphone shipments rose to 44 percent of unit sales, up from 36 percent the previous quarter capitalizing on LG’s strength in LTE phones. The company is planning to introduce new LTE models in the second half in developed 4G regions including North America and parts of Europe and Asia.

on the other hand, LG Home Appliance Company saw its second-quarter 2012 operating profit nearly triple  to USD 143.23 million from the same period last year thanks to a better product mix and improved cost efficiency. Revenues also increased year-over-year to USD 2.50 billion from growth in developing markets. The company still expects improved results in the second half compared to the previous year despite ongoing weak demand in developed markets.

LG Air Conditioning and Energy Solution Company posted operating profit of USD 60.76 million, a 17 percent increase year-over-year. Revenues increased 21 percent quarter-to-quarter but declined year-over-year to USD 1.28 billion due to weak residential conditioner sales in Korea and low demand in developed markets. However, profitability improved year-over-year led by higher contribution from system air conditioner sales. The company will focus on improving profitability by introducing more energy-efficient products and by accelerating growth in its commercial air conditioner systems business.

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