LG Reports Increases In Q3 Sales, Profits

Seoul, South Korea — LG Electronics reported record revenue and operating profits for the third quarter, with global sales rising 15.7 percent to $11.2 billion from a year ago.

In the period, operating profit climbed to 850 billion Korean won (about $685 million), resulting in a margin of 6.1 percent, 1.3 percentage points higher than the third quarter last year, the company said.

Net profit in the period rose to $650 million (807 billion Korean won) compared with just 25 billion Korean won in the same period a year ago.

LG said that on a parent basis sales shot up to $6.34 billion (7.87 trillion Korean won) with an operating profit of $486 million (603 billion won) in the September quarter.

The company attributed the performance to successful growth and competitiveness initiatives during the current global recession.

For the fourth quarter, the company said it expects TV sales to see modest growth on a quarter-over-quarter and year-over-year basis. However, price erosion in the TV and handset businesses and an increase in marketing/R&D investment “will likely result in lower profitability quarter-over-quarter,” the company said.

The home entertainment unit saw third-quarter sales rise by 23.9 percent to 3.97 billion (4.93 trillion won), returning a profit of $205 million (255 billion won) for a margin of 5.2 percent, 4.4 percentage points higher than the previous year, “as a result of strong product leadership and rising demand for flat-panel TVs amid the peak season,” the company said.

On the whole, the company said profitability increased due to higher sales, structural improvements in the plasma display panel business and generally stable profitability in all six businesses in the home entertainment division as a result of the company's cost competitiveness drive.

The mobile communications unit reported a 21.9 percent increase in sales to $3.75 billion (4.65 trillion won) year over year and an operating profit of $314 million (390 billion won) with a margin of 8.4 percent.

Handset sales rose 24.8 percent to $3.53 billion (4.38 trillion), from the same quarter in 2008, and operating profit reached $309 million (384 billion won), resulting in a margin of 8.8 percent.

Shipments of handsets increased 37 percent year over year and 6 percent quarter over quarter to 31.6 million units following strong growth in emerging and European markets, reflecting the popularity of the Cookie and messaging phones. The company said it had “a slight decline in unit sales in North America and Korea” in the same period.

However, price erosion, along with increased sales of low-end handsets, resulted in lower profitability compared to the second quarter, the company said.

The home appliance unit posted an 11.9 percent increase to $2.03 billion (2.52 trillion won) in the third quarter, compared with the same period last year. The company said “recovery of demand in emerging markets” contributed to the 11.9 percent growth year over year on a Korean won base (4 percent decline year over year on a U.S. dollar base).

The operating margin was 6.7 percent, 1.7 percent higher from a year earlier, at $137 million (170 billion won).

LG said higher sales in emerging markets and ongoing cost reduction were able to overcome an increase in marketing expenses to generate a higher margin year-over-year. In the fourth quarter, market demand for durable goods is expected to pick up in emerging countries such as China and India.

The air conditioning unit saw a 13.4 percent year-over-year decline in third-quarter sales to $686 million (851 billion won) due to the global recession, while operating margin resulted in a profit of $11 million (14 billion won).

Despite the recession, the company said it sees market demand and sales increasing in Asia, Africa and Central and South America, with highly efficient commercial air conditioning products leading the growth.

LG also expects market share to grow in Korea and the southern hemisphere, led by its energy-efficient commercial air conditioner (Multi-V Super III), as well as LG's inverter-embedded room air conditioners and commercial radiators.

The business solutions unit recorded a 2.6 percent rise in sales year over year to 973 million (1.21 trillion won) with an operating profit of $20 million (25 billion won).

Increased demand led to increased sales, more stable prices and higher profitability in the period, the company said.