Strong Home Appliance, Home Entertainment Results Drive Highest First-Quarter Profitability Ever
LG Electronics Inc. (LG) today posted consolidated sales of KRW 15.12 trillion (USD 14.1 billion) and operating profit of KRW 1.11 trillion (USD 1.03 billion) for the first quarter of 2018. Sales rose 3.2 percent from the first quarter last year and operating income soared by more than 20 percent, representing the highest first-quarter profit and revenue in company history and the highest quarterly profitability since the second quarter of 2009.
Both the LG Home Appliance & Air Solution Company and the LG Home Entertainment Company reported their largest quarterly operating profit ever with each recording double-digit operation margins. This marks the first time in history that the combined profits of the company’s two largest business units exceeded KRW 1 trillion. At the same time, LG’s business-to-business operations also generated strong quarterly profitability, while losses from mobile communications and vehicle components narrowed in the quarter.
The LG Home Appliance & Air Solution Company posted revenues of KRW 4.92 trillion (USD 4.59 billion) and operating profit of KRW 553.1 billion (USD 515.51 million). Sales of products such as air conditioners and premium washing machines as well as new models of dryers, air purifiers and LG Styler units increased in the domestic Korean market while sales in Europe, Asia and Latin America together grew 9.3 percent from the same period in 2017. Operating profit rose 8.2 percent compared with the 2017 first quarter, thanks to higher sales of premium products and lower costs due to operating efficiencies. Demand is expected to increase in the second quarter as air conditioners and refrigerators enter the peak season in the northern hemisphere.
The LG Home Entertainment Company reported sales of KRW 4.12 trillion (USD 3.84 billion) and operating profit of KRW 577.3 billion (USD 538.07 million). Revenue grew 7.4 percent compared to the same quarter last year as sales of premium products such as LG OLED TVs and SUPER UHD TVs remained strong. First-quarter operating profit increased 76.5 percent in 2018 versus 2017 due to the popularity of high-end TVs and improved cost structure, resulting in the company’s first-ever double digit quarterly operating margin of 14 percent. In the second quarter, LG expects the global TV market to benefit from upcoming global sports events.
The LG Mobile Communications Company recorded sales of KRW 2.16 trillion (USD 2.01 billion) and operating loss of KRW 136.1 billion (USD 126.85 million). Sales declined from the same quarter last year due to a revised smartphone launch strategy. Despite component price increases, the company shrank its operating deficit by continuing to improve its business structure. While the global smartphone market is forecast to experience stagnant growth and more intense competition in the second quarter, LG expects to see positive results with the launch of the LG G7 ThinQ flagship phone and the opening of the Software Upgrade Center to deliver higher-quality customer support.
The LG Vehicle Components Company posted revenues of KRW 840 billion (USD 782.9 million) and an operating loss of KRW 17 billion (USD 15.84 million). Sales of automotive infotainment products declined modestly by 1 percent from the first quarter 2017 due to slower vehicle sales. Still, with the increasing automotive industry focus on electric and autonomous vehicles in North America and Europe, the longer-term outlook for LG remains bright. The company will continue to strengthen its automotive components business through strategic partnerships with key clients as well as greater collaboration with other LG companies.
The LG Business-to-Business Company generated sales of KRW 642.7 billion (USD 599 million) and operating profit of KRW 78.8 billion (USD 73.45 million) in its debut quarter. First-quarter revenues grew 24 percent from last year, driven by higher sales of large screen digital signage displays and high performance solar modules. Operating profit jumped 192 percent from the same period 2017 due to the growing popularity of premium commercial products such as LG OLED digital signage displays and improved cost competitiveness, trends continuing into the second quarter.
20181Q Exchange Rates Explained
LG Electronics’ unaudited quarterly earnings results are based on IFRS (International Financial Reporting Standards) for the three-month period ending March 31, 2018. 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 1,072.91 per USD.