LG Electronics Achieves 'Record High' Performance in 12 Years... Home Appliances and TVs Soar (Comprehensive)

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[Asia Economy Reporter Jeong Hyunjin] LG Electronics' record-breaking performance in the first quarter of this year since its founding was largely driven by home appliances and TVs. Amid the ‘stay-at-home’ culture, the revenge consumption sentiment caused by COVID-19 concentrated demand on high-end premium appliances and extra-large TVs. As a result, LG Electronics surpassed its previous quarterly record operating profit of KRW 1.2438 trillion set in Q2 2009, breaking it after 12 years. The next-generation growth engine, the Vehicle Components (VS) Business Division, also continued its growth by reducing its deficit.

LG Electronics announced on the 7th that its provisional Q1 sales and operating profit were KRW 18.8 trillion and KRW 1.5 trillion, respectively, significantly exceeding recent market consensus (sales KRW 17.8601 trillion, operating profit KRW 1.2026 trillion). The provisional Q1 sales and operating profit increased by 27.7% and 39.2% year-on-year, respectively.

This is analyzed to be largely due to the role of the Home Appliance & Air Solution (H&A) Business Division, which accounts for nearly 40% of LG Electronics’ sales. The H&A Business Division is estimated to have surpassed KRW 6 trillion in sales for the first time in Q1 history. Operating profit reportedly exceeded KRW 800 billion for the first time on a quarterly basis. The sales growth in home appliances was driven by premium appliances such as the LG Objet Collection. The increasing sales proportion of premium appliances contributed to profitability. Additionally, strong sales of new steam appliances centered on Styler, dryers, and dishwashers continued, and the rental business also showed growth.

Increased sales of premium TVs from North America and Europe also contributed to LG Electronics’ ‘earnings surprise.’ According to market research firm Omdia, LG Electronics shipped 2.05 million OLED TVs last year. Omdia’s forecast for LG Electronics’ Q1 OLED TV shipments is 759,000 units, which suggests that over 3 million units could be sold annually if this trend continues. The securities industry expects LG Electronics’ Home Entertainment (HE) Business Division sales in Q1 to have increased by about 30% year-on-year.

The VS Business Division, which LG Electronics is focusing on as a new growth engine, is increasing sales while reducing its operating loss. During Q1, demand from automakers recovered, and the proportion of electric vehicle parts expanded, leading to gradual performance growth.

On the other hand, the smartphone business, which recently decided to withdraw, continued to perform poorly. It recorded losses for 24 consecutive quarters through Q1. The cumulative deficit is estimated to be in the KRW 5 trillion range. Although LG Electronics officially announced its smartphone business withdrawal by the end of July, immediate improvement in performance is unlikely. One-time costs related to the suspension of operations and production in the Mobile Communications (MC) Business Division will be reflected in Q2 results. However, with the disappearance of the MC Business Division’s losses that had been dragging down performance, financial structure improvement is expected to accelerate from next year.

LG Electronics is expected to record more than a 10% year-on-year increase in operating profit for both home appliances and TVs in Q2 as well. Based on the results from Q1 and Q2, LG Electronics’ annual performance this year is expected to surpass last year’s (sales KRW 63.26 trillion, operating profit KRW 3.195 trillion). Kim Jisan, a researcher at Kiwoom Securities, noted, "Attention should be paid to the impact of cost pressures such as rising semiconductor and raw material prices and increased logistics costs," adding, "LG Electronics will undertake corresponding cost reduction efforts and overcome these challenges through expanding premium sales."

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