LG Electronics Posts Highest Third Quarter Earnings in Its History
Seoul - LG Electronics, Inc. (LG) reported record revenues and operating profits in the third quarter, reflecting the results of the company’s successful growth and competitiveness initiatives during the current global recession.
Sales and Profit
Record sales and operating profits on both a parent and a global basis were reported for the three months ending September 30, 2009. Sales on a global basis (including LG’s overseas subsidiaries) soared 15.7 percent to KRW 13.9 trillion (USD 11.2 billion) year-over-year. Operating profit was up to KRW 850 billion (USD 685 million) resulting in a margin of 6.1 percent, 1.3 percent point higher than the third quarter last year. On a parent basis, the company recorded sales of KRW 7.87 trillion (USD 6.34 billion) and an operating profit of KRW 603 billion (USD 486 million).
The Home Entertainment Company saw third-quarter sales rise by 23.9 percent to KRW 4.93 trillion (USD 3.97 billion), returning a profit of KRW 255 billion (USD 205 million) for a margin of 5.2 percent, 4.4 percent points higher than the previous year, as a result of strong product leadership and rising demand for flat panel TVs amid the peak season. On the whole, profitability increased due to higher sales, structural improvements in the plasma display panel business and generally stable profitability in all six business divisions in the HE Company as a result of its cost competitiveness drive.
The Mobile Communications Company reported KRW 4.65 trillion (USD 3.75 billion) in sales, 21.9 percent higher year-over-year and an operating profit of KRW 390 billion (USD 314 million) with a margin of 8.4 percent. Handset sales accounted for KRW 4.38 trillion (USD 3.53 billion), up 24.8 percent from the same quarter in 2008, and operating profit reached KRW 384 billion (USD 309 million), resulting in a margin of 8.8 percent. Shipments of handsets saw an increase of 37 percent year-over-year and 6 percent quarter-over-quarter to 31.6 million units due to robust growth in emerging and European markets, thanks to products such as Cookie and messaging phones, despite a slight decline in unit sales in North America and Korea. Price erosion, along with increased sales of low-end handsets, resulted in lower profitability compared to the second quarter.
The Home Appliance Company posted an increase of 11.9 percent to KRW 2.52 trillion (USD 2.03 billion) in the third quarter, compared with the same period last year. Recovery of demand in emerging markets contributed to this growth year-over-year on a KRW base (4 percent decline year-over-year on a USD base). The company’s product competitiveness resulted in an operating margin of 6.7 percent, 1.7 percent higher from a year earlier, at KRW 170 billion (USD 137 million). Despite an increase in marketing expenses, higher sales in emerging markets and ongoing cost reduction generated a higher margin year-over-year. In the fourth quarter, market demand for durable goods is expected to pick up in emerging countries such as China and India.
The Air Conditioning Company recorded a 13.4 percent decline in third-quarter sales to KRW 851 billion (USD 686 million) year-over-year due to the global recession, while operating margin resulted in a profit of KRW 14 billion (USD 11 million). Despite the recession, the company sees market demand and sales increasing in Asia, Africa, Central and South America with highly efficient commercial air conditioning products leading the growth. LG also expects market share to grow in Korea and the southern hemisphere led by the world’s most energy-efficient commercial air conditioner (Multi-V Super III), as well as LG’s inverter-embedded room air conditioners and commercial radiators.
The Business Solutions Company announced a 2.6 percent rise in sales year-over-year to KRW 1.21 trillion (USD 973 million) with an operating profit of KRW 25 billion (USD 20 million). Sales revenue rose entering the high season as a result of increased demand, with higher sales and stable prices contributing to greater profitability. Forecasting the fourth quarter, developed markets are expected to see demand grow steadily with emerging markets also experiencing continued growth.
Financial Statement and Non-operating Items on a Parent Basis
LG recorded a recurring profit of KRW 1,027 billion (USD 828 million) and a net profit of KRW 807 billion (USD 650 million), a margin of 10.3 percent or 9.9 percent higher than the previous year. Foreign exchange gain of KRW 71 billion (USD 57 million) and equity method gain of KRW 368 billion (USD 297 million) from overseas subsidiaries and affiliates helped push up net profit. In particular, LG Display, in which LG Electronics owns a 37.9 percent stake, booked an equity method gain of KRW 210 billion (USD 169 million).
2009 4Q Business Direction and Prospects
Entering the peak season for TV, modest sales growth is expected both on a quarter-over-quarter and year-over-year basis. Price erosion in the TV and handset business and an increase in marketing/R&D investment will likely result in lower profitability quarter-over-quarter.
2009 3Q Exchange Rates Explained
For the unaudited consolidated earnings results of the three-month period ending September 30, 2009, 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 1,241 per USD (2009 Q3), KRW 1,291 per USD (2009 Q2, quarter-over-quarter) and KRW 1,063 per USD (2008 Q3, year-over-year).
Earnings Conference and Conference Call
LG Electronics will hold a Korean-language earnings news conference on October 21, 2009 at 16:00 Korea Standard Time at the LG Twin Tower Auditorium (B1 East Tower, 20 Yeouido-dong, Yeongdeungpo-gu, Seoul, Korea). An English-language conference call will follow on October 22, 2009 at 10:00 Korea Standard Time (01:00 GMT/UTC). Participants are asked to call +82-31-810-3001 and enter the passcode 9084#. The corresponding presentation file will be available for download at the Investor Relations section of the LG Electronics website (http://www.lge.com/ir/archive/main.jhtml). Please visit http://pin.teletogether.com/eng/ and pre-register with the passcode provided. For those unable to participate, an audio recording of the news conference will be available for a period of 30 days after the conclusion of the call. The recording may be accessed by dialing +82-31-931-3100 and entering the code 142600# when prompted.
Sales and Profit
Record sales and operating profits on both a parent and a global basis were reported for the three months ending September 30, 2009. Sales on a global basis (including LG’s overseas subsidiaries) soared 15.7 percent to KRW 13.9 trillion (USD 11.2 billion) year-over-year. Operating profit was up to KRW 850 billion (USD 685 million) resulting in a margin of 6.1 percent, 1.3 percent point higher than the third quarter last year. On a parent basis, the company recorded sales of KRW 7.87 trillion (USD 6.34 billion) and an operating profit of KRW 603 billion (USD 486 million).
The Home Entertainment Company saw third-quarter sales rise by 23.9 percent to KRW 4.93 trillion (USD 3.97 billion), returning a profit of KRW 255 billion (USD 205 million) for a margin of 5.2 percent, 4.4 percent points higher than the previous year, as a result of strong product leadership and rising demand for flat panel TVs amid the peak season. On the whole, profitability increased due to higher sales, structural improvements in the plasma display panel business and generally stable profitability in all six business divisions in the HE Company as a result of its cost competitiveness drive.
The Mobile Communications Company reported KRW 4.65 trillion (USD 3.75 billion) in sales, 21.9 percent higher year-over-year and an operating profit of KRW 390 billion (USD 314 million) with a margin of 8.4 percent. Handset sales accounted for KRW 4.38 trillion (USD 3.53 billion), up 24.8 percent from the same quarter in 2008, and operating profit reached KRW 384 billion (USD 309 million), resulting in a margin of 8.8 percent. Shipments of handsets saw an increase of 37 percent year-over-year and 6 percent quarter-over-quarter to 31.6 million units due to robust growth in emerging and European markets, thanks to products such as Cookie and messaging phones, despite a slight decline in unit sales in North America and Korea. Price erosion, along with increased sales of low-end handsets, resulted in lower profitability compared to the second quarter.
The Home Appliance Company posted an increase of 11.9 percent to KRW 2.52 trillion (USD 2.03 billion) in the third quarter, compared with the same period last year. Recovery of demand in emerging markets contributed to this growth year-over-year on a KRW base (4 percent decline year-over-year on a USD base). The company’s product competitiveness resulted in an operating margin of 6.7 percent, 1.7 percent higher from a year earlier, at KRW 170 billion (USD 137 million). Despite an increase in marketing expenses, higher sales in emerging markets and ongoing cost reduction generated a higher margin year-over-year. In the fourth quarter, market demand for durable goods is expected to pick up in emerging countries such as China and India.
The Air Conditioning Company recorded a 13.4 percent decline in third-quarter sales to KRW 851 billion (USD 686 million) year-over-year due to the global recession, while operating margin resulted in a profit of KRW 14 billion (USD 11 million). Despite the recession, the company sees market demand and sales increasing in Asia, Africa, Central and South America with highly efficient commercial air conditioning products leading the growth. LG also expects market share to grow in Korea and the southern hemisphere led by the world’s most energy-efficient commercial air conditioner (Multi-V Super III), as well as LG’s inverter-embedded room air conditioners and commercial radiators.
The Business Solutions Company announced a 2.6 percent rise in sales year-over-year to KRW 1.21 trillion (USD 973 million) with an operating profit of KRW 25 billion (USD 20 million). Sales revenue rose entering the high season as a result of increased demand, with higher sales and stable prices contributing to greater profitability. Forecasting the fourth quarter, developed markets are expected to see demand grow steadily with emerging markets also experiencing continued growth.
Financial Statement and Non-operating Items on a Parent Basis
LG recorded a recurring profit of KRW 1,027 billion (USD 828 million) and a net profit of KRW 807 billion (USD 650 million), a margin of 10.3 percent or 9.9 percent higher than the previous year. Foreign exchange gain of KRW 71 billion (USD 57 million) and equity method gain of KRW 368 billion (USD 297 million) from overseas subsidiaries and affiliates helped push up net profit. In particular, LG Display, in which LG Electronics owns a 37.9 percent stake, booked an equity method gain of KRW 210 billion (USD 169 million).
2009 4Q Business Direction and Prospects
Entering the peak season for TV, modest sales growth is expected both on a quarter-over-quarter and year-over-year basis. Price erosion in the TV and handset business and an increase in marketing/R&D investment will likely result in lower profitability quarter-over-quarter.
2009 3Q Exchange Rates Explained
For the unaudited consolidated earnings results of the three-month period ending September 30, 2009, 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 1,241 per USD (2009 Q3), KRW 1,291 per USD (2009 Q2, quarter-over-quarter) and KRW 1,063 per USD (2008 Q3, year-over-year).
Earnings Conference and Conference Call
LG Electronics will hold a Korean-language earnings news conference on October 21, 2009 at 16:00 Korea Standard Time at the LG Twin Tower Auditorium (B1 East Tower, 20 Yeouido-dong, Yeongdeungpo-gu, Seoul, Korea). An English-language conference call will follow on October 22, 2009 at 10:00 Korea Standard Time (01:00 GMT/UTC). Participants are asked to call +82-31-810-3001 and enter the passcode 9084#. The corresponding presentation file will be available for download at the Investor Relations section of the LG Electronics website (http://www.lge.com/ir/archive/main.jhtml). Please visit http://pin.teletogether.com/eng/ and pre-register with the passcode provided. For those unable to participate, an audio recording of the news conference will be available for a period of 30 days after the conclusion of the call. The recording may be accessed by dialing +82-31-931-3100 and entering the code 142600# when prompted.
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