LG: appliances, air conditioning and home entertainment drive the growth

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LG washing machine with Twin Wash system.

LG Electronics announced second-quarter 2016 operating income of KRW 584.6 billion (USD 503.10 million), nearly 140 percent higher than the previous year, from strong performance by the Home Appliance & Air Solution and Home Entertainment companies, both reporting the highest quarterly operating profit in LG’s history. Global consolidated revenues of KRW 14 trillion (USD 12.05 billion) increased both year-on-year and quarter-on-quarter.

LG washing machine with Twin Wash system.
LG washing machine with TwinWash system.

Considering the different divisions, LG Home Appliance & Air Solution Company accounted for the largest share of the second quarter’s operating profit with KRW 433.7 billion (USD 373.24 million). Revenues of KRW 4.70 trillion (USD 4.04 billion), an increase of 4.8 percent from the second quarter last year, were driven by growth in B2B sales of air conditioning systems and strong overall performance in Korea, Europe and Asia. With an improved product portfolio and cost structure, the business unit was able to achieve an operating margin of more than 9 percent. Going forward, premium products such as the LG Signature collection, TwinWash and LG Styler are expected to contribute positively to the performance of the company.
LG Home Entertainment Company reported KRW 356.7 billion (USD 306.97 million) in operating profit on revenues of KRW 4.16 trillion (USD 3.58 billion), a 5.7 percent increase from the 2015 second quarter, in large part thanks to the growing market for premium TVs. An increase in sales of higher-end Ultra HD and Oled TVs and improved cost structure management contributed to an operating margin of 8.6 percent, the highest in the history of LG’s home entertainment division. The business unit will continue to benefit from the growing UHD and Oled TV markets and cost competitiveness, although cost increases for flat-panel components may affect profitability.
Besides, LG Mobile Communications Company saw revenues of KRW 3.33 trillion (USD 2.86 billion), an increase of 12 percent from the first quarter, while declining from the same period the year before. An operating loss of KRW 153.5 billion (USD 132.10 million) reflected increased marketing expenditures and somewhat slow initial sales of G5 smartphone. Overall smartphone shipments increased 3 percent from the previous quarter with a total of 13.9 million smartphones shipped in the second quarter. The launch of the new V series and expanding sales of mass-tier K and X series models are expected to improve the business unit’s performance next quarter.