Solid Home Appliance and Home Entertainment Performance Offsets Challenges in Mobiles
LG Electronics Inc. (LG) today announced third-quarter 2016 sales of KRW 13.2 trillion (USD 11.8 billion) and operating income of KRW 283.2 billion (USD 252.7 million), reflecting strong performance of its Home Appliance & Air Solution business and increased profitability in Home Entertainment, which offset sales declines and operating losses from Mobile Communications.
LG Home Appliance & Air Solution Company third-quarter revenue increased 3 percent year-over-year with its strongest performance coming from European and Asian markets. Operating income of KRW 342.8 billion (USD 305.9 million) resulted in a solid operating margin of 8 percent, a 40 percent improvement from the same period last year. Strong performance of air conditioners and premium appliances helped profitability, despite unfavorable currency fluctuations in MEA and Latin American countries.
LG Mobile Communications Company third-quarter revenues were KRW 2.5 trillion (USD 2.3 billion), 23 percent lower than in the same period of 2015. Lower sales of premium devices and expenses related to business structure improvement activities contributed to a quarterly operating loss of KRW 436.4 billion (USD 389.4 million). LG shipped 13.5 million smartphones in the quarter, with North America reporting a 14 percent increase in sales from the second quarter. Priorities for the final quarter of the year will include increasing sales of the new LG V20 smartphone and mass-tier K and X series and finalizing business structural improvements in the mobile division to be better prepared for the challenges ahead.
LG Home Entertainment Company reported the highest operating profit and margin in its history with KRW 381.5 billion (USD 340.4 million) and 9.2 percent, respectively, as sales of premium LG OLED and Ultra HD TVs continued to gain traction in key markets around the world. Due to price erosion driven by intense competition, sales declined by 3.4 percent from last year’s third quarter with revenues of KRW 4.1 trillion (USD 3.7 billion) nearly unchanged from the previous quarter. With the peak holiday selling season ahead, overall demand for TV products is expected to increase although profitability will likely be affected by higher material costs and increased marketing investments.
LG Vehicle Components Company saw a strong increase in third-quarter sales to KRW 674.9 billion (USD 602.2 million), for an increase of 41 percent year-over-year and 6 percent from the previous quarter. The company reported a modest operating loss of KRW 16.2 billion (USD 14.5 million) due primarily to increased R&D investments to support future growth. With more and more electric vehicle projects – led by the GM Bolt – on the horizon, the VC Company expects to see continued growth.
2016 3Q Exchange Rates Explained
LG Electronics’ unaudited quarterly earnings results are based on IFRS (International Financial Reporting Standards) for the three-month period ending September 30, 2016. Amounts in Korean won (KRW) are translated into U.S. dollars (USD) at the average rate of the three-month period of the corresponding quarter — KRW 1,162 per USD.
Earnings Conference and Conference Call
LG Electronics will hold an English language conference call on October 28, 2016 at 09:00 Korea Standard Time (00:00 GMT/UTC). Participants for the English conference call are instructed to call +82 31 810 3061 and enter the passcode 9084#. The corresponding presentation file will be available for download at the LG Electronics website (www.lg.com/global/ir/reports/earning-release.jsp) at approximately 16:00 on October 27, 2016. Visit http://pin.teletogether.com/eng and pre-register with the passcode provided. For those unable to participate, an audio recording of the news conference will be available for a period of 30 days after the conclusion of the call. To access the recording, dial +82 31 931 3100 and enter the passcode 142830# when prompted.
*For more information on LG products, visit www.lg.com/my