LG Electronics, LG today reported a 46 percent increase in net profits for the second quarter of 2012 versus the same period a year ago. 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.
Due to a combination of more premium products, strategic focus on developing markets and aggressive cost reductions, second-quarter net profit increased 46 percent year-over-year to KRW 159 billion USD 138.02 million while operating profit more than doubled to KRW 349 billion 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 KRW 12.86 trillion USD 11.16 billion due to declining feature phone sales and weak demand for IT products.
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 216 billion USD 187.5 million year-over-year. Sales declined 5.8 percent from the same period a year ago to KRW 5.48 trillion 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 somewhat in the most recent quarter with an operating loss of KRW 57 billion 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 KRW 2.32 trillion 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.
LG Home Appliance Companysaw its second-quarter 2012 operating profit nearly triple to KRW 165 billion (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 KRW 2.88 trillion 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 Companyposted operating profit of KRW 70 billion (USD 60.76 million), a 17 percent increase year-over-year. Revenues increased 21 percent quarter-to-quarter but declined year-over-year to KRW 1.47 trillion (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.
2012 2Q Exchange Rates Explained
LG Electronics unaudited quarterly earnings results are based on IFRS (International Financial Reporting Standards) for the three-month period ending June 30, 2012. Amounts in Korean Won (KRW) are translated into US Dollars USD at the average rate of the three month period in each corresponding quarter: KRW 1,152 per USD 2012 2Q and KRW 1,084 per USD 2011 2Q.