(2nd LD) LG Electronics Q4 operating profit up more than 4-fold

(ATTN: ADDS para 2; ADDS executive's remarks in para 9,10; ADDS capex plan in last
para)
By Lee Youkyung
SEOUL, Jan. 27 (Yonhap) -- LG Electronics Inc., the world's second-largest TV
maker, said Wednesday that its operating profit in the fourth quarter of last
year rose sharply thanks to strong demand for its products.

But its share value declined on concerns about decreasing profits in its handset
business and its weak smartphone line-up, which analysts said could be outweighed
by LG's expected increase in its global flat-screen TV market share.
Operating profit came in at 446.7 billion won (US$382 million) in the three
months to December, up more than four-fold from 101 billion won a year earlier,
the company said in a release.
Sales reached 14.3 trillion won, up 6.8 percent over the cited period. The
figures were consolidated, meaning they included the financial results of the
company's overseas units.
LG, which announced its 2009 earnings on a parent basis Tuesday, logged 297.2
billion won in fourth-quarter net income. The company did not provide its
consolidated net profit.
Shares of LG Electronics closed down 1.85 percent at 106,000 won on the Seoul
bourse.
LG said its profits from flat-screen TV sales offset slow handset sales. Global
shipments of liquid crystal display (LCD) TVs rose 52 percent on-year to 5.5
million units on rising demand from developed countries.
LG, also the world's third-largest handset maker, said its handset shipments rose
32 percent on-year to 33.9 million units in the fourth quarter, but earnings
decreased on a fall in prices.
"The handset (business) is in a difficult situation now," Jung Do-hyun, LG's
chief finance officer, told an investor meeting. "The proportion of smartphones
in developed countries is growing fast and telecoms companies are providing
subsidies mainly to smartphones, while cutting subsidies for feature phones."
LG overtook Motorola Inc. and Sony Ericsson Mobile Communications Ltd in 2008 and
clinched the No. 3 handset maker spot thanks to its strength in traditional
mobile devices that the industry calls feature phones. But it was seen as a late
comer in the smartphone market, the only segment that grew substantially while
the overall handset market shrank last year. Jung said LG will prepare a variety
of smartphone line-up in the second half of this year.
"I think the fourth quarter marks the bottom," said Yoon Hyuk-jin, an analyst at
Shinyoung Securities Co.
Analysts expected that LG's annual earnings this year may fall slightly due to
the local currency's ascent against the U.S. dollar, even though sales will
likely go up from the last year.
A stronger won usually makes South Korean exports more expensive, eating into
exporters' dollar earnings. The Korean won rose 8.16 percent against the
greenback last year, while it is widely expected to hover about 1,100 won against
the dollar this year.
"The competition in the market this year will be much more tough," said Kim
Woon-ho, an analyst at Prudential Investment & Securities. "This year's currency
exchange rate is less favorable than 2009, and the handset business is very
vulnerable to the foreign exchange rate."
The Korean currency's sharp fall in the first half of 2009 boosted LG's operating
profits in the January-March quarter last year, analysts said, adding the current
quarter's earnings will diminish year-on-year.
Though LG's weak smartphone business continued to weigh on its share performance,
analysts said LG's performance in other handset business and LCD TVs will
outweigh concerns.
"In 2010, Europe and China will contribute larger sales to LG's handset business,
while the proportion of North American markets will go down," said Prudential's
Kim, adding demand for LG's non-smartphones will remain strong in the year ahead.
"I think the concerns about LG's smartphone are overestimated."
LG forecast that its earnings from TVs will be stronger than last year, as it
aims to increase high-end products.
"Sales of flat-screen TVs are expected to increase, but the competition will be
more intense," said LG in a statement. "Profits will hinge on enlarging the
competitive edge in high-end premium products."
LG will spend 3.6 trillion won in capital expenditure this year, including 1.5
trillion won in infrastructure investment, up about 1.2 trillion won last year.
ylee@yna.co.kr
(END)

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