LG Electronics reported a sharp fall in profits in the second quarter, due to widening losses at its smartphone and automotive businesses. While revenues were up 4.1 percent to KRW 15.63 trillion, operating profit dropped 15.4 percent from a year earlier to KRW 652 billion, and net profit more than halved to KRW 106 billion.
At the mobile division, sales were down 21 percent to KRW 1.613 trillion, and the operating loss widened to KRW 313 billion from KRW 184 billion a year ago. LG noted sales were still up 7 percent on a quarterly basis, thanks to the launch of its first 5G phone. However, this was offset by weak sales of its other premium models and intense competition in the mid-range market. Profit was hit by increased marketing costs for the new phones and one-off costs for reorganising its domestic production.
LG said it will continue to work on optimising production and costs in the mobile business amid expected stagnant demand going forward. It aims to continue to grow 5G sales, but sees competition intensifying in its key markets Korea and North America.
Similar to rival Sony, LG reported weak demand in the consumer electronics market, as TV sales declined compared to the World Cup period a year ago and marketing costs rose in order to fight the tough competition. Revenues at Home Entertainment were down 4.5 percent year-on-year to KRW 3.671 trillion. That compares to a record performance at the Home Appliances division, where revenues jumped 16.1 percent to KRW 6.103 trillion.
LG said it expects annual sales growth again in the third quarter and to maintain stable profitability. Market conditions are expected to remain difficult due to the global trade tensions and intense competition due to stagnating demand.
