LG Electronics Back to Profit on Smartphone Sales

on Oct 24, 2012

LG Electronics (KRX:066570) returned to profit in the third quarter of the year, lifted by surprisingly strong handset sales as the business benefited from the growing popularity of its smartphones which operate on fourth-generation Long Term Evolution (LTE) networks, The Financial Times reported on 24 October 2012.

**LG’s Q3 Results**
The South Korean electronics maker posted a net profit of 157.1 billion won (£86.6 million) for the three months ended September 30, which is a dramatic recovery from the loss of 413.9 billion won (£228 million) it recorded in the same period last year.
Profit from LG’s home entertainment division, which competes with Samsung and Sony in the TV sector, recorded an operating profit of 88.6 billion won (£50.2 million), offsetting sluggish demand in the global TV industry. The stable performance was credited to an increase in LCD TV sales that expanded 10 per cent in the third quarter from the prior quarter.

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During the July-September period, LG’s home appliance division which makes washing machines and refrigerators logged an operating profit of 128.5 billion won (£72.8 million), slightly down from a profit of 165 billion won (£93.5 million) in the previous quarter. The company’s air conditioning and energy solution business also posted a decline from the prior quarter, due to weak demand for air conditioners during the off-season period.

!m[South Korean Electronics Maker Posts Q3 Profit as Its Mobile Business Reports Surprise Return ](/uploads/story/634/thumbs/pic1_inline.png)Meanwhile, LG’s mobile division recorded a third-quarter profit of 22 billion won (£12.1 million), compared to a 138.8 billion won (£78.8 million) loss a year earlier, thanks largely to increased sales of the manufacturer’s LTE-enabled smartphones which offer faster internet connections. Overall, the company shipped more than 14 million handsets, a 9 per cent increase over the previous quarter.

**Return to the Premium Smartphone Market**
Once the world’s third-largest phone maker by shipments, LG Electronics had slipped to fifth by the second quarter of the year, reflecting its struggles to find a compelling product to challenge the likes of Apple’s iPhone and Samsung’s Galaxy series. LG is also contending with fierce pricing in the lower-end segment. But its mobile phone business has gained momentum with last month’s domestic launch of Optimus G, the company’s latest LTE-enabled smartphone.

LG said in a statement that it “expects to further increase its [handset] shipments and revenue in the fourth quarter with the global launch of the Optimus G smartphone.” The South Korean firm plans to step up marketing for its new phone as the year-end shopping season approaches. LG also said that it will strengthen its “LTE push in advanced markets”, since the company’s profit structure is benefiting from the greater portion of smartphones that run on faster LTE networks, which are taking off in South Korea, Japan and the United States.
**Analysts’ Q4 Forecasts**
Although still lagging behind Samsung and Apple in the fast-growing smartphone industry, LG’s handsets sales are picking up and the South Korean manufacturer is expected to increase its share of the global market in coming quarters. According to some analysts, in the fourth quarter of 2012, the electronics maker will see a gradual improvement at some of its main divisions thanks to increasing demand for its high-end smartphones and TV sets as demand for consumer electronics normally picks up near the year-end shopping season.
South Korean stock brokerage and investment banking firm Daewoo Securities, however, cautioned that LG’s operating profit may fall slightly in the current quarter because of “typically weak sales of air-conditioners as well as increased marketing costs for its smartphone business.” But the company’s flagship smartphones will help it retain its competitiveness in the smartphone market from early next year, added Daewoo, which expects LG’s fourth-quarter operating profit to be around 193.1 billion won (£109.5 million).


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