LG Electronics Achieves Over 3 Trillion KRW Operating Profit for the First Time Last Year Amid 'Untact Boom'... Record High Sales (Comprehensive Report 2)

[Image source=Yonhap News]

[Asia Economy Reporters Heungsun Kim and Hyunjin Jung] LG Electronics posted its best-ever performance last year as demand for home appliances and IT devices increased due to the spread of contactless (untact) trends amid the COVID-19 pandemic.

LG Electronics announced on the 29th that its consolidated operating profit for last year reached 3.195 trillion KRW, up 31.1% from the previous year. This is the first time its annual operating profit has exceeded 3 trillion KRW. Sales also hit a record high of 63.262 trillion KRW, up 1.5% from the previous year.

Operating profit in the fourth quarter of last year was 650.2 billion KRW, a 538.7% increase from the previous year, while sales for the same period rose 16.9% to 18.7808 trillion KRW. The operating profit margin was 3.5%. Sales, operating profit, and operating profit margin were all the highest ever recorded for a fourth quarter. Sales exceeded 18 trillion KRW for the first time on a quarterly basis.

Home Appliances Drive Record Performance... Strong Home Appliance and TV Sales in Q4, Smartphone Slump

By division, the H&A Business Division, responsible for home appliances, showed outstanding results. Annual sales reached 22.2691 trillion KRW, and operating profit was 2.3526 trillion KRW, both record highs. The annual operating profit margin (10.6%) also reached double digits for the first time. The company explained that this was due to increased sales of new steam appliances such as stylers, dryers, and dishwashers, as well as expanded rental business sales.

The Vehicle Component Business (VS) faced difficulties early last year due to production halts at automakers in North America and Europe. However, from the second half of the year, operations normalized, automotive parts demand recovered, and sales from new projects increased, leading the VS Business Division to record its highest annual sales of 5.8015 trillion KRW.

In the fourth quarter of last year, the H&A Business Division posted sales of 5.5402 trillion KRW and operating profit of 299.6 billion KRW, both the highest ever for a fourth quarter. Sales showed double-digit growth both domestically and overseas compared to the same period last year, and operating profit increased by 145.2% year-on-year.

The HE Business Division, responsible for TVs and others, recorded sales of 4.283 trillion KRW and operating profit of 204.5 billion KRW in the fourth quarter of last year. Sales increased in major markets such as North America and Europe, recovering to the 4 trillion KRW level for the first time in eight quarters. Operating profit rose 102.5% year-on-year, despite a sharp increase in LCD panel prices, due to expanded sales of premium products such as OLED TVs and NanoCell TVs.

[Image source=Yonhap News]

The MC Business Division, responsible for smartphones, posted an operating loss of 248.5 billion KRW in the fourth quarter of last year, with losses widening compared to the previous quarter. In contrast, the VS Business Division reduced its operating loss to 2 billion KRW in Q4, raising prospects for a return to profitability this year. Additionally, the BS Business Division, handling B2B transactions, recorded sales of 1.5085 trillion KRW and operating profit of 70.3 billion KRW.

Strengthening Advanced Technologies such as AI, 5G, and Mobility This Year

LG Electronics plans to integrate core technologies such as artificial intelligence (AI), 5G, Internet of Things (IoT), and mobility across all business areas this year to drive growth and transformation based on customer value. The company aims to expand sales of hygiene appliances, space appliances, and premium products like OLED TVs, while actively responding to product demand generated by the spread of untact trends.

However, the home appliance sector is expected to face challenges due to uncertain market conditions. In particular, market uncertainties caused by worsening exchange rates, raw material costs, and logistics expenses are expected to increase business risks. The H&A Business Division stated, "We plan to maintain sales growth by appropriately responding to market changes and secure profitability through cost structure improvements and optimal resource allocation."

The TV market is expected to sustain global demand as people spend more time at home. When dividing this year into the first and second halves, LG Electronics forecasts that the untact trend from last year will continue in the first half, but TV demand will decline in the second half as consumers return to normal life with vaccine supply. The HE Business Division plans to increase sales and maintain profitability by expanding sales of premium products such as OLED TVs, NanoCell TVs, and large-sized TVs.

The VS Business Division aims to secure a profit-generating foundation to return to profitability this year. It also plans to strengthen vehicle software capabilities and stabilize the electric vehicle parts joint venture 'LG Magna e-Powertrain' (tentative name) early to enhance business competitiveness. LG Electronics stated in a conference call, "The VS Business Division's top priority this year is to return to profitability," adding, "Although there will be differences by product, the mid-to-long-term goal is to achieve an operating profit margin of over 5% for all."

The BS Business Division plans to expand sales and improve profitability by leveraging competitive products. The IT business will actively respond to increased demand due to non-face-to-face trends, and the Information Display business will focus on key customer groups such as education and enterprises. The solar power business also aims to expand sales by strengthening product competitiveness.

The MC Business Division's mobile business, which has accumulated losses exceeding 5 trillion KRW over several years, is at a point where it must make the best choice by objectively assessing current and future competitiveness. LG Electronics said, "We are keeping all possibilities open and carefully reviewing the business operation direction." Furthermore, in the conference call, it stated, "The MC Business Division's core mobile technologies are important assets not only for devices but also for smart appliances and automotive components," and "We are reviewing various internalization plans to create synergy with future businesses and will share specific details when the MC business direction is decided."

Largest Dividend Payment in 11 Years Alongside 'Record Performance'

At a board meeting held the day before, LG Electronics decided to pay cash dividends of 1,200 KRW per common share and 1,250 KRW per preferred share. This represents about a 60% increase from last year's dividends of 750 KRW for common shares and 800 KRW for preferred shares. The company is paying the largest dividends in 11 years since 2010, following its record performance.

The total dividend amount is 216.9 billion KRW for common shares and 21.5 billion KRW for preferred shares, with the dividend record date set as December 31 of last year. This will be finalized after approval at the shareholders' meeting scheduled for March.

In the conference call, LG Electronics stated, "Considering uncertainties in internal and external business environments, we will continue to return value to shareholders through dividends while maintaining a stable financial structure in the future," outlining its shareholder return plan.

This content was produced with the assistance of AI translation services.