LG Reports Solid Growth in First Quarter Earnings
Johannesburg, South Africa, 14 May, 2010: LG Electronics (LG) today announced unaudited earnings results based on IFRS (International Financial Reporting Standards) for the three-month period ending March 31, 2010.
Sales and Profit
LG posted consolidated first quarter 2010 sales of KRW 13.7 trillion (USD 11.9 billion) and operating profit of KRW 529 billion (USD 462 million), increasing sales 3.7 percent (up 28 percent in USD) and operating profit by 2.6 percent (up 26 percent in USD) year-over-year.
The LG Home Entertainment Company’s revenues grew 20 percent from a year ago as demand for flat panel TVs surged, resulting in sales of KRW 5.2 trillion (USD 4.5 billion) and operating profit of KRW 182 billion (USD 159 million). LCD TV shipments jumped 62 percent to 5.2 million units compared to the same period last year. An aggressive product line-up led by Full LED LCD TVs and a higher proportion of premium products will continue to drive profits for the LG Home Entertainment Company.
The LG Mobile Communications Company posted a sales revenue decrease of 19.4 percent year over-year as a result of the low season and a drop in mobile phone prices. Handset shipments reported 27.1 million units while its sales dropped 19.7 percent year over-year. Operating profit dropped to 0.9 percent year-over-year due to investment and marketing expenses. The company expects to improve sales and profitability through new smartphone launches and expansion of global platform models.
The LG Home Appliance Company showed consistent positive performance with eight percent year-over-year growth (33 percent growth on a USD base) on sales of KRW 2.4 trillion (USD 2.1 billion) and operating profit of KRW 207 billion (USD 181 million).
Sales from overseas markets grew 34 percent compared to the first quarter of 2009 led by solid sales in China, India and North America. Market demand in the second quarter is expected to slow down but the company will secure profitability and market leadership through aggressive cost reduction and sustainable sales growth.
The LG Air Conditioning Company saw sales decreased six percent (15 percent growth on a USD base) year-over-year to KRW 1.2 trillion (USD 1.0 billion) and operating profit came at KRW 43 billion (USD 38 million). Growth led by emerging markets is expected as the peak season approaches and the global economy continues to recover.
The LG Business Solutions Company recorded a strong increase in sales of 15.4 percent year-over-year with sales reaching KRW 1.3 trillion (USD 1.1 billion) on stronger demand for IT products and solid demand in emerging markets. Sales of car infotainment products grew with the recovery of the automobile market and monitor sales also picked up, especially in Europe and South and Central America.
Financial Statement and Non-operating Items
Net profit for the first quarter of 2010 rose significantly to KRW 675 billion (USD 590 million), compared to a loss of KRW 200 billion (USD 142 million) a year earlier. Equity method gain of KRW 219 billion (USD 191 million) from affiliates helped push up net profit. In particular, LG Display booked an equity method gain of KRW 230 billion (USD 201 million).
LG adopted the International Financial Reporting Standards (IFRS) in 2010 with the objective of unifying its global accounting and financial reporting standards. The 104 subsidiaries of which LG owns more than 50 percent of voting shares have been consolidated under IFRS, including overseas subsidiaries and LG Innotek. As a result, LG Display, in which LG Electronics owns a 37.9 percent stake, will no longer be consolidated in LG Electronics’ earnings results.
2010 2Q Business Direction and Prospects
The company expects to see growth in the second quarter of 2010 with the global economic recovery and the start of the high season for air conditioning business. LG will continue to introduce new products in major categories including smartphones, invest aggressively in R&D and marketing and develop premium products in order to secure its position in respective categories.
2010 1Q Exchange Rates Explained
Amounts in Korean Won (KRW) are translated into US Dollars (USD) at the average rate of the three month period in each corresponding quarter: KRW 1,145 per USD (2010 1Q) and KRW 1,409 per USD (2009 1Q).