First-Half Sets Multiple Records: Highest Global Revenues, Highest Operating Profits and First Time Sales Exceed 30 Trillion Won
LG Electronics Inc. (LG) reported consolidated global sales of KRW 15.02 trillion (USD 13.9 billion) and operating profits of KRW 771 billion (USD 715.1 million) for the second quarter of 2018. Second-quarter sales rose 3.2 percent while operating profits increased 16.1 percent from the same period last year. Strong profitability from home appliances and air solutions and premium home entertainment products offset second-quarter operating losses from vehicle components and mobile communications.
First-half 2018 sales and operating profits were at all-time record highs. Revenues increased 3.2 percent from the 2017 first half to KRW 30.14 trillion (USD 28 billion) and operating income rose 18.5 percent to KRW 1.88 trillion (USD 1.7 billion). In light of uncertainties surrounding market conditions, competition and the international trade landscape going forward, LG enters the second half with an intense focus on cost competitiveness and profitable growth.
The LG Home Appliance & Air Solution Company posted strong second-quarter 2018 sales of KRW 5.26 trillion (USD 4.88 billion) and operating profits of KRW 457.2 billion (USD 424.04 million). Quarterly revenues grew 4.3 percent from last year, in part due to strong seasonal sales of air conditioners, and increased shipments of the LG Styler garment care system and air purifiers, especially in the domestic Korean market. Quarterly operating income increased 1.7 percent compared to the same period of 2017, driven by cost management and sales of premium clothes washers and refrigerators, offsetting the effects of higher raw material prices and unfavorable exchange rates. First half revenues for LG Home Appliances and Air Solutions were the highest in company history, exceeding 10 trillion (USD 9.47 billion) for the first time.
The LG Home Entertainment Company reported second-quarter sales of KRW 3.82 trillion (USD 3.54 billion) and operating profit of KRW 407 billion (USD 377.48 million). Revenues increased 4.1 percent from the 2017 quarter due to healthy sales of LG OLED TVs, LG SUPER UHD TVs and other premium products. Operating income increased 44.1 percent from the second quarter last year, repeating Home Entertainment’s double-digit operating profit margin performance from the 2018 first quarter. In the second half, while the global TV market is expected to see weaker demand primarily due to the economic downturn in Latin America, the Middle East and Africa, the company plans to maintain its solid profit strategy by expanding sales of premium products and further enhancing cost competitiveness.
The LG Mobile Communications Company recorded sales of KRW 2.07 trillion (USD 1.92 billion) and an operating loss of KRW 185.4 billion (USD 171.95 million). Quarterly sales declined from last year due to the slowing growth of the global smartphone market and a decline in mid- to low-end smartphone sales in Latin America. The second-quarter operating loss was largely due to contracting sales and increased marketing investments to support new flagship smartphone launches. With competition in the premium smartphone category expected to intensify and growth to remain stagnant in the second half, the company will seek to further improve its business structure and increase sales of the new premium LG G7 ThinQ and LG V35 ThinQ flagship smartphones in key markets around the world.
The LG Vehicle Components Company posted sales of KRW 872.8 billion (USD 809.5 million) and an operating loss of KRW 32.5 billion (USD 30.14 million). Sales increased 3.9 percent from the second quarter last year as mass production on new projects commenced. The quarterly operating loss reflects increases in raw material prices such as memory and additional resource requirements for new projects. Uncertainties in the global auto industry and in U.S. trade policy will continue to challenge the business unit over the course of the year, although the expected growth of connected and electric vehicles is promising for LG Vehicle Components in the longer term.
The LG Business-to-Business Company reported sales in the second quarter of KRW 588.5 billion (USD 545.82 million) and operating profit of KRW 39 billion (USD 36.17 million). Revenues grew 10.7 percent from the second quarter last year, thanks to stronger sales of large-scale digital signage products and high-efficiency solar modules. Operating profit soared 73.3 percent from the 2017 period on increased sales of premium products and improved cost competitiveness. In the second half, demand for premium digital signage is expected to continue to increase, while the solar module business will likely face increased competition and market challenges due to the ever-changing international trade environment.
2018 2Q Exchange Rates Explained
LG Electronics’ unaudited quarterly earnings results are based on IFRS (International Financial Reporting Standards) for the three-month period ending June 30, 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 1,078.20 per USD.