LG Electronics imprinted the phrase’LG for home appliances’ on the market again. Thanks to the strong sales of home appliances and TVs, the company recorded the highest annual performance last year, and in the first quarter of this year, it changed the highest quarterly performance. This is the result of the combination of’pent-up consumption’ and premium strategy according to non-face-to-face demand. There is already a prospect that a new record will be written again this year as well.
The No. 1 Contribution is New Home Appliances
LG Electronics announced on the 7th that it posted consolidated sales of 18.8057 billion won and operating profit of 1.5178 billion won (provisional) in the first quarter. Both sales and operating profit achieved record-breaking results on a quarterly basis. Compared to the first quarter of last year, sales increased by 27.7% and operating profit by 39.2%.
The No. 1 contributor is the H&A business headquarters. It is estimated that 1Q operating profit exceeded 800 billion won for the first time. More than half of the total operating profit came from household appliances. Sales also surpassed 6 trillion won for the first time.
The secret is a premium home appliance strategy. An official from LG Electronics explained, “Sales of new home appliances including steam home appliances have been steadily good, and the’LG Object Collection’, a space interior home appliance, and’LG Whissen Tower’ air conditioners that have completely changed their design in six years have become popular.
The rental business, which is recently expanding, also added strength. LG Electronics is trying to differentiate itself in the rental business with care solution services. It is a management service such as product professional cleaning and parts replacement. LG Electronics’ rental business sales have increased by 44% annually over the past five years.
The TV business (HE division) also increased both sales and operating profit in the first quarter. It is reported that the sales portion of premium products such as OLED TV and nano cell TV was large. In the securities industry, sales of the HE headquarters are expected to increase by about 30% compared to the same period last year. Market research firm Omdia estimates LG Electronics OLED TV shipments in the first quarter of 759,000 units. Compared to the same period last year, the scale has more than doubled.
In the electrical equipment business (VS Business Division), sales increased as the demand for finished cars, which had been reduced by Corona 19, recovered, reducing the deficit. The non-face-to-face trend of the BS (Business Solution) business also continued, and sales increased as demand for new and replacement information technology (IT) products continued in the academy season.
Smartphone withdrawal also contributes to profitability improvement
The industry expects LG Electronics’ performance this year to surpass the record-high last year (sales of 63,2638 billion won and operating profit of 3,191.8 billion won). The market consensus, which is the average forecast of securities firms, is sales of 69,951.5 billion won and operating profit of 3,788.8 billion won.
The decision to withdraw from the smartphone business is also expected to contribute to profitability improvement. LG Electronics suffered a loss of 840 billion won in the smartphone business last year. The securities industry expects LG Electronics’ operating profit to increase by up to 600 billion won when the mobile phone business is closed at the end of July. A company official said, “We will speed up sales of OLED TVs while continuing our home appliance premium strategy.” The atmosphere is also good. Omdia predicts that the global OLED TV market, where LG Electronics is the No. 1 market, will exceed 2 million units for the first time in the fourth quarter of this year.
The electronics (automotive electronic equipment) business is expected to turn to the black in 3Q. Profitability is expected to improve significantly as the supply of low-cost supply contracts, which has been cited as the cause of the deficit, has ended and a joint venture with Magna, Canada, the world’s third-largest electronics maker, was launched in July this year. The industry predicts that the joint venture will increase sales by 50% every year after making about 500 billion won in sales this year.
President Kwon Bong-seok
LG Electronics is looking for new business opportunities in fields such as artificial intelligence (AI), big data, connected cars, digital transformation (DX), and robots. In a letter sent to executives and employees on the 5th, Kwon Bong-seok, president of LG Electronics, emphasized, “The end of the MC business is a decision to prepare for a new leap forward.” .
Reporter Lee Soo-bin [email protected]