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LG operating profit slides 15.4% on weak phones

July 31,2019
LG Electronics posted a double-digit drop in its operating profit in the second quarter, largely due to a poor performance by the mobile communications division that resulted in a loss of more than 300 billion won ($270 million). The company posted an operating loss in the mobile communications division for the 17th consecutive quarter.

LG Electronics announced Tuesday an operating profit of 652.3 billion won in the second quarter, a 15.4-percent on-year drop. Sales stood at 15.63 trillion won, which was a 4.1-percent increase from the same period a year ago.

Its Home Appliance & Air Solution unit posted a 717.5-billion-won operating profit, a 55.4-percent increase, on 6.1 trillion won in sales, which was a 16.1-percent jump from the same period the previous year. Household appliances like the LG Styler, air purifiers and wireless vacuum cleaners were popular in the quarter. The beginning of the summer season, which led to demand for air conditioners, helped.

The Home Entertainment division, which sells TVs, posted 205.6 billion won in operating profit, a 49.2-percent on-year decrease, on 3.67 trillion won in sales, down 4.5 percent. Operating profit and sales dropped due to increased costs of marketing, according to the company.

Industry analysts believe a low-price strategy adopted by Samsung Electronics and China’s electronics maker TCL in the U.S. market contributed to LG’s loss in TV sales in the second quarter.

The mobile communications division posted a 313-billion-won operating loss, down 70.4 percent on year, on 1.61 trillion in sales, down 21.3 percent. The newly launched 5G smartphone LG V50 ThinQ sold well, the company said, but there was stagnant demand for 4G smartphones.

LG said the decision to move its smartphone production line from Pyeongtaek, Gyeonggi, to Vietnam in July resulted in one-time costs.

“Insecurities in the market are forecast to continue due to factors like the trade conflict between the United States and China, Japan’s export regulations against Korea and Brexit,” according to LG Electronics. “The company plans to pay particular attention to premium goods and expects an improved performance in the B2B businesses.”

LG added that it will bolster its mobile communications division by introducing 5G smartphones and affordable smartphone models.

BY JIN MIN-JI [jin.minji@joongang.co.kr]