Marketing for the new G5 flagship smartphone has been costly for LG Electronics in the first quarter but strong sales of TVs and home appliances boosted its profit by 65 percent, the South Korean tech giant has said. The company announced first-quarter 2016 operating profit of KRW 505.2 billion (USD 420.25 million), a 65.5 percent increase from the same period in 2015 on sales of KRW 13.36 trillion (USD 11.12 billion).

The LG Home Appliance & Air Solution Company contributed the largest amount, KRW 407.8 billion (USD 339.23 million) in operating income for the quarter, while the LG Home Entertainment Company earned KRW 335.2 billion (USD 278.84 million) in operating profit, both up significantly from the first quarter of 2015.

The LG Mobile Communications Company posted an operating loss of KRW 202.2 billion (USD 168.20 million) primarily due to increased marketing expenditures for the new LG G5 flagship smartphone, while the LG Vehicle Components Company reported a modest loss of KRW 15.8 billion (USD 13.14 million) reflecting higher R&D investments.

LG expects its overall global sales and profitability to improve in the second quarter, with double-digit growth in revenues and higher profitability anticipated as LG continues its premium-focused strategy with LG SIGNATURE products, the LG G5 smartphone and 4K Ultra HD OLED TVs.

LG Display in black

In relate dnews, LG Display stayed in the black in the first quarter amid earlier outlook of an expected shortfall due to the decrease in panel prices. This was largely due to the company’s profit-centered panel product strategy, intensive cost reduction programs and favorable exchange rates.

LG Display plans to shift its focus of new investment and production lines from liquid-crystal display (LCD) to high value added organic light-emitting diode (OLED) in the long term.

LG Display Chief Financial Officer Kim Sang-don said that the company will invest 4 trillion to 5 trillion won (US$3.48 to 4.35 billion) in facilities. However, it is time to make proper investment plans as OLEDs now have expanded to TV, mobile device, car and lighting businesses, beyond mass production.

The production lines will be gradually transferred from LCD to OLED. Kim said, "With the increase in demand from clients, we have started running additional production lines in the second half of last year and boosted OLED panel manufacturing capacity to 34,000 units per month. We will be able to produce 60,000 eighth-generation OLED panels per month after the second quarter of next year, continuously expanding the investment. In the mobile device sector, we will also convert the current main low temperature polycrystalline silicon (LTPS) LCD panel lines to plastic OLED panel lines by stages."

The company announced its earnings in the first quarter on Apr. 23 that it recorded 5.99 trillion won (US$5.21 billion) in sales and 39.5 billion won (US$34.38 million) in operating profits. It marked the 16th consecutive quarter for the company to post an operating profit since the second quarter in 2012. However, its sales and operating income in the first quarter dropped 20.1 percent (1.51 trillion won or US$1.31 billion) and 34.8 percent (21.1 billion won or US$18.36 million), respectively, from the previous quarter.