ID :
135078
Wed, 07/28/2010 - 23:12
Auther :

(3rd LD) LG Electronics Q2 net plummets 32.9 pct on handset losses


(ATTN: UPDATEs with executive remarks from para 8)
By Lee Youkyung
SEOUL, July 28 (Yonhap) -- LG Electronics Inc., the world's third-largest maker
of mobile handsets by shipment, said Wednesday its second-quarter earnings
tumbled 32.9 percent from a year ago as its handset business lost money for the
first time in four years.
Net profit reached 856.4 billion won (US$721 million) in the April-June period,
compared with a revised 1.28 trillion won a year earlier, the company said in a
regulatory filing.
Sales fell 0.7 percent on-year to 14.41 trillion won, while operating profit also
plunged to 126.2 billion won from a revised 1.24 trillion won a year ago.
The operating profit was far below a median estimate of 246.2 billion won in a
Yonhap News Agency poll of 6 analysts.
The figures reflect earnings from LG and its overseas affiliates. The financial
results from a year earlier were revised based on International Financial
Reporting Standards, which LG adopted this year.
The poor second-quarter performance shocked the market. Shares of LG Electronics
closed at 101,000 won on the Seoul bourse, down 2.88 percent from Tuesday's close.

"This is an expected earnings shock," said Kim Do-han, an analyst for Samsung
Securities. "Many expected that operating profit would be less than 200 billion
won."
Following the world's largest handset maker Nokia Corp.'s report of a 40 percent
fall in its second-quarter earnings on the absence of a megahit smartphone model,
LG's earnings took a beating from the intensifying smartphone competition.
"The main reason, above all, was mobile handsets." Jung Do-hyun, LG's chief
financial officer (CFO), told analysts.
"The portion of smartphone surged globally but we could not roll out a meaningful
smartphone model," he added. "We have a large portion of feature phones but their
prices decreased significantly."
Prices of so-called feature phones, which provide conventional cell phones
without the ability to access e-mails, surf the Web or download application
programs, continued to be squeezed as consumers in developed markets flock to
do-it-all smartphones like the popular iPhone. The average selling price of
regular cellphones fell to $100 from around $130 a year ago, according to LG.
While global smartphone makers like Apple Inc. and HTC Corp. are chalking up big
profits, LG's mobile communication division, which accounts for some 30 percent
of the company's entire sales, has swung to loss for the first time since the
second quarter of 2006.
It posted 119.6 won in operating loss in the second quarter, compared with 544.5
billion in profit a year ago. Handsets' profit margin stood at negative 3.7
percent.
LG's other flagship products, flat-screen TVs, also reported a decline in profits
as higher prices of liquid-crystal display (LCD) panels drove up costs, while
prices of TV dropped amid intensifying competition from rivals like Samsung
Electronics Co. and Japan's Sony Corp.
LG forecasts that its earnings will register "moderate growth" in the current
quarter as the global recovery improves demand.
But a substantial improvement in earnings hinges on the turnaround of the handset
business, company officials said, which LG expects to take place in the fourth
quarter when new models will be launched.
"Any meaningful improvement in profit is difficult in the third quarter," Jung
said of mobile communication division. "We are expecting an earnings improvement
starting in the fourth quarter."
LG said it is planning to roll out some 20 smartphone models before December. A
tablet PC based on the Android operating system will be put on the market in the
fourth quarter.
Higher supplier of premium flat-screen TVs, such as light-emitting diode (LED)
TVs and 3D TVs will drive up its profits in coming months, while the company also
expects to benefit from supply glut in TV panels, which will push down component
prices.
Analysts, however, remained skeptical that LG's handset business will make a
turnaround any time soon.
"I don't think there will be any noticeable earnings improvement until after the
first half of next year," said Chun Seong-hoon, an analyst for Eugene Investment
& Securities. "The division will likely continue to post losses through the third
and the fourth quarters."
ylee@yna.co.kr
(END)

Delete & Prev | Delete & Next

X