LG Reports Record Operating Income Margin, Revenue Decline
LG Electronics Inc. (LG) today announced first-quarter 2020 consolidated revenue of KRW 14.73 trillion (USD 12.45 billion) -- 1.3 percent lower than last year -- and operating profit of KRW 1.09 trillion (USD 921.47 million).
Although the company's revenue declined modestly compared with the same period last year, operating income improved 21.1 percent from the 2019 quarter making this only the second time in history when quarterly operating profit exceeded KRW 1 trillion. The 7.4 percent operating margin was the highest in LG’s history for a first quarter.
By sector, the company’s home appliances division was the biggest performer, achieving the largest-ever first-quarter operating profit and business margin, despite negative consumer sentiment amid the pandemic.
Of the entire operating profit, the home appliance business accounted for over 75 percent, posting 753.5 billion won. The operating margin stood at 13.9 percent.
“As consumers show growing interest in health and hygiene, the sales of dryers, stylers and dishwashers increased in Korea, but overall sales declined due to lower sales overseas due to the COVID-19 impact,” the company said.
Revenues from LG Home Appliance & Air Solution Company were virtually unchanged from the first quarter last year, the effect of softer global demand during the pandemic offset by higher sales in Korea of steam appliances such as washers, dryers, dishwashers and the LG Styler clothing care system, reflecting consumer interest in health and hygiene. Operating profit (3.6 percent higher than the same period last year) and operating margin were the highest in LG’s history, benefitting from cost-reduction efforts and increased interest in premium products.
The LG Home Entertainment Company posted first-quarter revenues of KRW 2.97 trillion (USD 2.51 billion), a decrease of 4.8 percent from the same period last year as a result of component supply constraints and slowing global demand due to lower consumer confidence. Taking into account the reclassification of information technology products from the Home Entertainment Company to the Business Solutions Company this year, operating income of KRW 325.8 billion (USD 275.32 million) increased 31.7 percent from the same period last year as a result of operating efficiencies and expansion of premium products such as OLED TVs and NanoCell TVs. With market demand affected negatively by the pandemic, LG is adjusting the proportion of premium products, expanding online sales, optimizing resource input and streamlining asset management to improve profitability going forward.
The LG Mobile Communications Company reported first-quarter sales of KRW 998.6 billion (USD 843.9 million), narrowing its operating loss to KRW 237.8 billion (USD 200.96 million) from the previous quarter. Sales decreased nearly 34 percent from last year’s first quarter, primarily due to supply disruptions from Chinese partners. Costs were further reigned in through production and marketing efficiencies, ongoing efforts to help buffer the effect of the pandemic. LG hopes that the new LG Velvet 5G smartphone launch in Korea during the second quarter will mark a new direction with a different design philosophy, competitive yet value-conscious components and enhanced online sales initiatives.
The LG Vehicle Component Solutions Company recorded first-quarter revenues of KRW 1.32 trillion (USD 1.11 billion), a 2.1 percent decline from the same period last year with an operating loss of KRW 96.8 billion (USD 81.8 million) as a result of the business disruption of North American and European automakers. To minimize ongoing pandemic risk the company will accelerate its supply chain optimization efforts taking into consideration a reduction in demand from automakers and continue to improve its business structure with further cost savings in the second quarter.
The LG Business Solutions Company generated first-quarter sales of KRW 1.71 trillion (USD 1.44 billion), an increase of 3.5 percent year-on-year and 18.8 percent higher than the previous quarter thanks to increased sales of solar modules and IT products such as LG gram notebooks. Operating profit of KRW 212.2 billion (USD 179.3 million) marked 26.3 percent higher than the same period the year earlier and 159 percent higher than the previous quarter due to increased solar module sales, stable profitability from information displays and innovations in productivity. To help minimize further pandemic disruptions, the company is expanding online sales efforts for IT product to capture a greater share of the telecommuting and distance-learning markets.