LG says Q1 operating profits may decline over 18%

Seoul, April 6 (IANS) LG Electronics Inc. has said its first quarter operating profits are expected to drop 18.8 per cent from a year earlier, mainly due to its sluggish smartphone business.

In an earnings guidance, the South Korean electronics major said it expects to post 899.6 billion Won ($791.8 million) in operating profits in the January-March period -- above the average market expectation of around 800 billion won.

Its sales are expected to be 14.9 trillion Won in the first three months of 2019, sliding 1.4 per cent from a year ago, the firm said.

The company did not provide detailed performances for each division, saying it will release its earnings report later in April, Yonhap news agency reported.

The operating profit in the preliminary earnings report was up more than 11 times from the previous quarter figure and the company's second-highest quarterly record.

Market watchers say the strong demand for home appliances was expected to have improved its profitability, offsetting losses from the sluggish mobile business.

In the wake of the worst bout of fine dust in South Korea this year, LG Electronics posted brisk sales of products related to air quality, such as air purifiers, dryers and clothing-care home appliances.

Sales from its home appliance rental service have also been on the rise as more people opt for renting gadgets to save money on purchases, installations and maintenance.

"The release of new televisions and home appliances are expected to enhance LG Electronics' profitability, but it may be hard for the mobile communication division to make a turnaround in the first quarter," Park Sung-sun, an analyst at BNK Investment and Securities, said.

In March, LG released its new flagship smartphone -- the G8 ThinQ -- which drew a lukewarm market response compared with Samsung's Galaxy S10. It plans to release the V50 ThinQ, its first 5G smartphone with a detachable second screen, in South Korea on April 19.

Analysts estimated LG posted over 200 billion Won in operating losses from its mobile business in the first quarter, extending losses from a year ago and marking the eighth consecutive quarterly deficit.

According to industry tracker Strategy Analytics, LG smartphones' market share fell from 17.4 per cent in 2017 to 14.3 per cent in 2018 in South Korea. Its share in the North American market also fell from 16.9 per cent to 15.9 per cent over the cited period.

"It is important to create enough demand to cover the rise in marketing costs when the flagship smartphones go into full-scale sales in the second quarter," Koh Ui-young, an analyst at HI Investment and Securities, said.