LG Electronics, First Ever Sales of 80 Trillion Won... Operating Profit Holds Up (Comprehensive)

Operating Profit -12.6%... Struggles in TV and Robots
Sales 83 Trillion... "Maintaining Profitability in Jeonjang Business"

LG Electronics building in Yeouido, Seoul. (Photo by Yonhap News)

[Asia Economy Reporters Moon Chaeseok, Kim Pyeonghwa] LG Electronics is being praised for minimizing the decline in profitability by recording operating profits in the 3.5 trillion KRW range last year. However, its operating profit in the fourth quarter fell by 91.2% compared to the same period last year.

On the 6th, LG Electronics announced that its provisional consolidated sales for last year reached a record high of 83.4695 trillion KRW, but its provisional operating profit was only 3.5472 trillion KRW. Operating profit decreased by 12.6% compared to 2021.

Even when narrowed down to the fourth quarter alone, operating profit was 65.5 billion KRW, shrinking by 91.2% from the previous year. This was only about one-seventh of the securities analysts’ estimate of 420.7 billion KRW.

LG Electronics diagnosed that the BS (Business Solutions) division, including TV and robots, struggled. In the TV business, the impact was significant due to a global decline in demand and ongoing geopolitical risks in Europe, which weakened the sales of premium TVs during the peak season. Consumers tightened their wallets, rendering all efforts ineffective. To normalize distribution inventory, promotional expenses were used, which also reduced profitability.

The BS business also saw profitability decline as marketing expenses were poured into normalizing inventory buildup caused by a global decrease in IT product demand.

The home appliance business saw a slight decrease in sales due to demand reduction caused by inflation in major countries and intensified overseas competition, LG Electronics reported. However, in terms of profitability, it said it "posted a slight profit."

The automotive parts business maintained its profitability again this time. The VS (Vehicle Components & Systems) division, regarded as a future growth engine company-wide, showed strong performance.

LG Electronics explained, "Stable order volumes from automakers and efficient supply chain management related to key raw materials led to a significant increase in sales compared to the same period last year, and profitability remained positive." However, due to increased initial operating expenses for new production corporations and rising product development costs for large-scale new orders secured this year, the scale of the fourth-quarter profit was smaller than that of the third quarter of last year.

Although overall profitability declined, it is considered a relatively good performance given the year-long struggles with inventory management caused by decreased demand. It is also encouraging that the VS division, which has strong growth momentum, maintained its profitability.

Regardless of financial indicators, since the VS division pledged at the global stage (CES 2023) to accelerate autonomous driving collaboration with Magna and ePowertrain, investment sentiment is not expected to weaken significantly.

The value chain of LG Electronics’ automotive business revolves around the VS division, ZKW, and Magna ePowertrain. LG Electronics’ VS division is confident that it has seized the right timing to elevate the world-class vehicle infotainment system to the next level.

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