November 26, 2024

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LG Electronics' headquarters in Yeouido, western Seoul (LG Electronics)

Despite the global economic downturn, LG Electronics announced surprise earnings for the January-March period, outpacing its crosstown rival Samsung Electronics' financial result for the first time in more than a decade.

In a regulatory filing on Thursday, the consumer electronics giant said its operating profit for the first quarter was 1.5 trillion won ($1.12 billion), down 22.9 percent from a year earlier. It has become the company’s second-highest profit for the January-March period.

Sales fell 2.6 percent on-year to 20.42 trillion won, marking the third-highest figure in the first quarter. Net income decreased 61 percent on-year to 546.5 billion won over the three months.

This means LG’s quarterly profit has outpaced Samsung for the first time since it embraced the International Financial Reporting Standards in 2009. Earlier in the day, Samsung reported its worst quarterly earnings in 14 years with an operating income of 600 billion won amid the global chip downturn.

LG’s first-quarter operating earnings have actually risen by 10-20 percent from a year ago, considering the 80 billion won temporary gains from patent licensing it generated in the first quarter of last year.

The company attributed its solid performance to stabilizing material costs and steady sales of high-end home appliances. It was also able to respond to an array of challenges through its company-wide efforts such as restructuring its business portfolio and operational structure, the company said.

LG's home appliance and air solutions unit logged an operating profit of 1.19 trillion won, a record high for the first quarter. It is the first time in history that a single business division has exceeded 1 trillion won in quarterly profit.

A series of factors such as growing TV demand in the European premium market and decreasing inventory levels boosted recovery in its TV business, making a turnaround after recording losses for the past three consecutive quarters, the company said.

Local analysts forecast that LG will likely post its largest yearly operating profit around 4.7 trillion won this year, which is about 32 percent higher than the previous year.

While Samsung debuted its first organic light-emitting diode TVs in a decade in Korea in the last month, LG saw its market share may decrease in some level, but it was confident to maintain its world's No. 1 TV maker position.

"We'll strengthen profitability by diversifying our business portfolio with improved operational capabilities and expansion of platform business," the company said during Thursday's earnings call. "We plan to diversify our content and service competitiveness, develop high-profit platforms and respond to hardware demand weakness."

The future breadwinner vehicle component business achieved its highest first-quarter performance with sales of 2.39 trillion won and an operating profit of 54 billion won.

LG expected to increase its order backlog of over 80 trillion won in its vehicle component solutions division this year. In addition to the high value-added product-centered vehicle component business, it plans to continue to explore new businesses with high growth potential such as robots and electric vehicle charging solutions.

"To achieve the goal, we are actively pursuing future business preparation activities such as investment in our own technology development, and efforts for mergers and acquisitions and joint ventures through inorganic methods," the company said.

LG’s quarterly earnings were announced at midday Thursday. The shares closed at 107,700 won, down 0.65 percent from the close of the previous session.

By Jie Ye-eun (yeeun@heraldcorp.com)