LG Electronics Anticipates Profit Turnaround in Automotive Sector... Operating Profit to Surpass 4 Trillion Won This Year

[Asia Economy Reporter Suyeon Woo] LG Electronics has achieved its highest-ever quarterly performance in the first quarter of this year due to the strong performance of its home appliance business. Along with the expected profitability turnaround of its new automotive components business this year, there is growing confidence that the company will achieve an annual operating profit of 4 trillion KRW.

According to industry sources on the 1st, LG Electronics' automotive components division recorded sales of 1.8935 trillion KRW and an operating loss of 700 million KRW in the first quarter of this year. The sales figure represents a remarkable 43.5% increase compared to the same period last year, and the operating loss was close to the break-even point (BEP).

This significant sales growth is attributed to the gradual recovery of major automobile markets such as North America and Europe since the beginning of this year, along with an increase in new projects in electric vehicle powertrain and infotainment sectors. LG Electronics plans to launch a joint venture, LG Magna e-Powertrain (tentative name, hereafter LG Magna), with Magna, the world's third-largest automotive parts supplier, on July 1st this year.

With the launch of LG Magna, the profitability turnaround of the automotive components division is expected to become visible. During the earnings conference call, LG Electronics expressed confidence in achieving profitability in the automotive components business in the second half of this year despite the ongoing global semiconductor shortage for vehicles.

Shim Sang-bo, LG Electronics' IR officer, stated, "Although some risks are expected from the second quarter due to production disruptions at automakers and increased costs from dual sourcing of parts, we believe that efficient supply chain management will enable us to achieve our goal of turning a profit this year."

With the establishment of the joint venture, LG Electronics' business focus, which had been dispersed across home appliances, mobile, automotive components, and business solutions, is expected to shift primarily to home appliances and automotive components. The company plans to decisively restructure its mobile business, which is experiencing expanding losses, and focus on the automotive components business, which has sufficient growth potential, nurturing it as a next-generation strategic business. According to LG Electronics, the order backlog for automotive components is expected to reach around 60 trillion KRW by the end of this year, with about half of that being infotainment components.

Kim Ju-yong, LG Electronics' VS Management Officer, said, "The electric vehicle parts market is expected to grow at an average annual rate of 35% until 2025, and the joint venture LG Magna is projected to achieve an average sales growth of 50%. However, due to the nature of the automotive parts industry, where it takes time from project orders to delivery, the sales synergy of the joint venture will fully materialize after 2024."

Thanks to its solid home appliance business and the new growth engine of the automotive components business, LG Electronics' annual sales consensus for this year is projected at 70.4588 trillion KRW, with an operating profit of 4.4406 trillion KRW. This represents an 11% increase in sales and a 39% increase in operating profit compared to the previous year.

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