LG Electronics posted its slowest quarterly profit growth in two years on Thursday citing higher marketing costs and tougher competition in the television business, despite the record full-year revenues and profit.
The company's fourth-quarter operating profit plummeted 80 percent from a year earlier to 76 billion won ($68.5 million), the company said. Revenue fell 7 percent to 15.8 trillion won primarily due to lower sales of mobile products, matching the company’s estimate.
Widening losses in the company’s struggling mobile business also dragged down profit.
Competition in the high-end television set market, particularly from Chinese rivals, as well as global economic headwinds are clouding the outlook for LG Electronics.
On the other hand, the company reported record full-year revenues of KRW 61.3 trillion (USD 54.4 billion) in 2018, exceeding sales of 60 trillion won for the second year in a row. Full-year profit of KRW 2.70 trillion (USD 2.40 billion) increased nearly 10 percent from 2017 reflecting record profitability from appliances and home entertainment products.
The LG Home Appliance & Air Solution Company reported full-year 2018 revenues of KRW 19.36 trillion (USD 17.17 billion), an increase of nearly 5 percent from the previous year, generating a profit of KRW 1.52 trillion (USD 1.35 billion), the highest in company history. Fourth-quarter revenues of 4.33 trillion (USD 3.84 billion) increased more than 3 percent from the same period last year with sales in Asia and Europe holding steady despite exchange rate challenges in Central and South America and political uncertainty in the Middle East.
The LG Home Entertainment Company recorded full-year revenues of KRW 16.21 trillion (USD 14.37 billion) with a record-high profit of KRW 1.52 trillion (USD 1.35 billion) thanks to the strengths of LG’s premium product lineup. Fourth-quarter 2018 sales of KRW 4.56 trillion (USD 4.04 billion) were 6 percent lower from the previous year but 23 percent higher than the previous quarter due in large part to strong seasonal demand. Going forward, LG intends to grow both revenue and operating profit by focusing on increasing sales of premium OLED TVs and large-screen Ultra HD TVs.
The LG Mobile Communications Company reported 2018 revenues of KRW 7.98 trillion (USD 7.08 billion) with sales in the fourth quarter totaling KRW 1.71 trillion (USD 1.51 billion), a decrease of 16 percent from the third quarter. Although the full-year operating loss increased to KRW 790.1 billion (USD 700.65 million), LG said its mobile division’s business structure showed improvement as a result of better material cost controls and overhead efficiencies based on the company’s platform modularization strategy. In 2019, LG’s mobile division will push 5G products and smartphones featuring different form factors while focusing on key markets where the LG brand remains strong.
The LG Vehicle Components Company reported solid full-year 2018 revenues of KRW 4.29 trillion (USD 3.80 billion), a 28 percent increase from 2017. Quarterly revenues of KRW 1.4 trillion (USD 1.24 billion), the highest performing quarter in the division’s history, were 71 percent higher than the same period last year and nearly 20 percent more than the third quarter largely due to new infotainment orders and strong performance from the ZKW business in Europe.