LG Electronics Q2 Results, as Expected, Home Appliances Drive Sales and Operating Profit Growth
Published2016.07.29 18:53Sales up 0.6%, Operating Profit up 139.5% year-over-year
LG Electronics recorded consolidated sales of 14 trillion 29 billion won and consolidated operating profit of 584.6 billion won in the second quarter.
Sales increased 0.6% year-over-year from 13 trillion 925.7 billion won in the same period last year, driven by strong home appliance sales, while operating profit surged 139.5% year-over-year from 244.1 billion won in the same period last year as profitability in the home appliance and TV segments continued to improve.
The H&A Business Division and HE Business Division led strong performance by achieving record quarterly operating profit. In particular, the HE Business Division also recorded the highest quarterly operating profit margin.
Home Appliances: Two Consecutive Quarters on Strength of Premium Product Sales and B2B Business Growth
H&A Business Division sales increased 4.8% year-over-year, driven by strong sales of premium products such as TwinWash washing machines and ice-purifying refrigerators as well as growth in B2B business such as system air conditioners.
Operating profit increased 48.6% year-over-year through continued improvement in cost competitiveness and expanded sales of premium products including 'LG SIGNATURE'. In particular, following the previous quarter (9.7%), the division achieved operating profit margin in the 9% range for a second consecutive quarter (9.2%).
MC Business Division sales declined 6.2% year-over-year and increased only 12.2% quarter-over-quarter due to initial supply disruptions of the G5, which prevented positive market response from translating into sales expansion. Additionally, operating losses continued due to increased marketing costs.
HE Business Division sales increased 5.7% year-over-year but declined 4.1% quarter-over-quarter due to continued economic slowdown in growth markets such as the Middle East and Africa.
Operating profit achieved record quarterly operating profit and highest operating profit margin (8.6%) simultaneously through expanded premium product sales such as OLED TVs and Ultra HD TVs as well as improved cost competitiveness.
TV: Record Quarter Achieved Through Expanded OLED TV Sales and Strengthened Cost Competitiveness
Mobile: Operating Losses Continue Due to Poor G5 Sales and Increased Marketing Costs
VC Business Division sales increased 41.9% year-over-year and 7.9% quarter-over-quarter through expanded sales of major automotive infotainment products such as AVN (Audio Video Navigation) and Telematics. The VC Business Division recorded operating losses due to increased resource investment in future growth areas including electric vehicle components and infotainment devices.
The home appliance market is expected to see slowdown in growth as air conditioners enter the seasonal off-season. The H&A Business Division will focus on sales of market-leading products such as TwinWash washing machines and stylizers, led by the ultra-premium brand 'LG SIGNATURE', in the general home appliance sector. The division will also strengthen B2B business including built-in kitchen appliances such as 'Signature Kitchen Suite'.
The smartphone market is expected to face intensified competition in the premium segment due to competitors' new flagship product launches. The MC Business Division will launch successor products to the V series and expand launch countries for entry-level products including the K and X series. The division will also continue efforts to improve profit structure to overcome the current situation.
Q3: Strengthening Premium Brand Positioning and Securing Solid Profitability Through Cost Competitiveness Improvement
TV market stagnation is expected to persist, but demand for premium products is anticipated to expand. The HE Business Division will focus on maintaining profitability by expanding the sales ratio of premium products such as OLED TVs and Ultra HD TVs.
Automotive component business opportunities are projected to expand due to electric vehicle market growth and advancement in automotive electrical components market. The VC Business Division plans to establish a leading image in the electric vehicle component market through full-scale mass production of parts for GM's Chevrolet Bolt EV scheduled for late August.
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