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LG manages $138 million profit in Q2 despite stalled smartphone efforts

Updated Dec 19th, 2018 8:30PM EST
BGR

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LG Electronics (066570) on Wednesday reported its financial results for the second quarter of 2012. As the company continues to push forward and pin hopes on the booming smartphone market, it still hasn’t found a way to profit from its efforts with Google’s (GOOG) Android platform. LG saw a healthy 46% increase in net profit, which rose to $138 million, but smartphone sales were down more than 28% year-over-year to KRW 2.29 billion. LG saw solid sequential growth in its home entertainment, home appliance and energy solutions divisions, though only the home appliance division managed revenue growth over the second quarter of 2011. Operating profits for LG’s home entertainment business grew substantially to KRW 216 billion and profit in the company’s home appliance division more than doubled to KRW 165 billion. LG’s full press release follows below.

LG ANNOUNCES SECOND-QUARTER 2012 FINANCIAL RESULTS

Solid Performance in Home Appliance and Home Entertainment
Helps Offset Difficult Quarter in Mobile Phones

SEOUL, July 25, 2012 –- LG Electronics (LG) today reported a 46 percent increase in net profits for the second quarter of 2012 versus the same period a year ago. Despite the continuing recessionary conditions, LG’s operating profit in the most recent quarter increased significantly year-over-year. Stronger performance in home entertainment and home appliances compared to the second quarter last year helped offset profit declines in LG’s mobile business.

Due to a combination of more premium products, strategic focus on developing markets and aggressive cost reductions, second-quarter net profit increased 46 percent year-over-year to KRW 159 billion (USD 138.02 million) while operating profit more than doubled to KRW 349 billion (USD 302.95 million) from the same period last year. Revenues, while 5.2 percent higher than in the first quarter, declined from last year’s second quarter by 10.6 percent to KRW 12.86 trillion (USD 11.16 billion) due to declining feature phone sales and weak demand for IT products.

LG Home Entertainment Company posted significantly improved operating profit in the quarter compared to the same period in 2011. Due in large part to an increase in sales of more premium products and improved supply chain management, operating profit more than doubled to 216 billion (USD 187.5 million) year-over-year. Sales declined 5.8 percent from the same period a year ago to KRW 5.48 trillion (USD 4.76 billion) but increased 2.8 percent from the first quarter of 2012. LG’s popular CINEMA 3D TVs will continue to drive sales in the second half as it pushes ahead to become the top global seller in the 3D segment.

LG Mobile Communications Company, after a positive first quarter, struggled somewhat in the most recent quarter with an operating loss of KRW 57 billion (USD 49.48 million) mainly due to greater marketing expenses related to new model launches in the quarter. Overall revenues declined 28.5 percent year-over-year to KRW 2.32 trillion (USD 2.01 billion) as a result of shrinking feature phone sales but smartphone shipments rose to 44 percent of unit sales, up from 36 percent the previous quarter capitalizing on LG’s strength in LTE phones. The company is planning to introduce new LTE models in the second half in developed 4G regions including North America and parts of Europe and Asia.

LG Home Appliance Company saw its second-quarter 2012 operating profit nearly triple to KRW 165 billion (USD 143.23 million) from the same period last year thanks to a better product mix and improved cost efficiency. Revenues also increased year-over-year to KRW 2.88 trillion (USD 2.50 billion) from growth in developing markets. The company still expects improved results in the second half compared to the previous year despite ongoing weak demand in developed markets.

LG Air Conditioning and Energy Solution Company posted operating profit of KRW 70 billion (USD 60.76 million), a 17 percent increase year-over-year. Revenues increased 21 percent quarter-to-quarter but declined year-over-year to KRW 1.47 trillion (USD 1.28 billion) due to weak residential conditioner sales in Korea and low demand in developed markets. However, profitability improved year-over-year led by higher contribution from system air conditioner sales. The company will focus on improving profitability by introducing more energy-efficient products and by accelerating growth in its commercial air conditioner systems business.

2012 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, 2012. Amounts in Korean Won (KRW) are translated into US Dollars (USD) at the average rate of the three month period in each corresponding quarter: KRW 1,152 per USD (2012 2Q) and KRW 1,084 per USD (2011 2Q).

Zach Epstein
Zach Epstein Executive Editor

Zach Epstein has been the Executive Editor at BGR for more than 10 years. He manages BGR’s editorial team and ensures that best practices are adhered to. He also oversees the Ecommerce team and directs the daily flow of all content. Zach first joined BGR in 2007 as a Staff Writer covering business, technology, and entertainment.

His work has been quoted by countless top news organizations, and he was recently named one of the world's top 10 “power mobile influencers” by Forbes. Prior to BGR, Zach worked as an executive in marketing and business development with two private telcos.