LG Electronics overcame the Corona 19 crisis last year and set a new annual performance record last year.
It is interpreted as the influence of securing profitability by flexibly responding to the home appliance and TV market by seeing the’home economy’ as an opportunity in the non-face-to-face era. This is thanks to the steadily reducing operating losses of the smartphone and electronic equipment business. The annual maximum performance is expected in the new year.
LG Electronics announced on the 8th that last year’s operating profit was estimated to be 3.19 trillion won, a 31% increase from the previous year (2.43 trillion won). Last year’s sales amounted to 63,2638 billion won, an increase of 1.5% from the same period last year (62.36 trillion won). Last year’s annual sales and operating profit were the highest, respectively, and this is the first time that the annual operating profit exceeded 3 trillion won.
In addition, in the fourth quarter of last year, the company recorded the highest quarterly sales and the highest operating profit in the fourth quarter. LG Electronics’ operating profit in the fourth quarter of last year was 670 billion won, an increase of 535.6% from the same period last year (111.8 billion won). During the same period, the sales amounted to 18 trillion 7826 billion won, up 16.9% from the same period last year (16 trillion 61 billion won).
LG Electronics’ earnings turned downward after a direct hit by Corona 19 in the second quarter of last year, but it has judged changes in consumption patterns in non-face-to-face trends as business opportunities, expanded online sales to meet consumer demand, and strengthened marketing strategies. As a result, home appliances led the overall performance, and TV also performed well. Smartphones and battlefield deficits have also improved continuously.
The H&A division, which is in charge of household appliances, is considered to be the protagonist who showed potential in a crisis. In line with the Zipcock trend, domestic and overseas sales and operating profits of hygiene and health care appliances grew evenly and cost improved, recording the first double-digit operating margin in the third quarter. In the fourth quarter of last year, it is expected to record an operating profit of around 400 billion won, and the highest operating margin in the fourth quarter is expected.
The HE business division, which is in charge of TV, continued to increase demand in advanced markets such as North America and Europe, as well as premium products such as OLED TVs and nanocell TVs. LG Electronics has been actively promoting operational efficiency by strengthening online specialized products and digital marketing. In the fourth quarter of last year, it is expected to record an operating profit of 200 billion won amid intensifying competition due to the peak season at the end of the year.
The MC business division in charge of smartphones recorded a loss for 23 consecutive quarters until the fourth quarter of last year, but it is continuing to improve its business structure by improving the efficiency of global production sites, actively utilizing the manufacturer development production (ODM) method, and strengthening cost competitiveness.
In addition, it will speed up the deficit improvement by expanding the 5G lineup and attacking Huawei’s gap due to US sanctions. In 4Q, operating loss is expected to be in the low 200 billion won. The first LG rollable phone to be introduced in the new year is also attracting attention.
The VS business division in charge of electrical equipment saw a significant reduction in operating losses in the second half of last year due to increased sales and improved cost structure. This is due to the return of global auto parts demand to recovery as automakers in North America and Europe normalize their operations.
In the future, as high growth in the connectivity field and electric vehicle parts business is expected, we will expand cooperation with electric vehicle related companies to strengthen their targeting in the Asian and North American markets.
Researcher Roh Gyeong-tak of Eugene Investment & Securities said, “Latin and South America is a key region where 27% of LG Electronics’ smartphone shipments and 19% of sales are generated. The company’s third-largest business group will be positioned as the company’s third-scale business group due to an increase in parts supply amid full-fledged electric vehicle projects, and profits will improve in earnest along with the quarterly turnaround.
In particular, in December of last year, LG Electronics decided to establish’LG Magna E-Powertrain’, a joint venture in the field of electric vehicle powertrain (power transmission system) with Canadian Magna International, the world’s third-largest auto parts maker.
Through this joint venture, LG Electronics’ electronics division is speeding up its targeting the eco-friendly car and electric parts market. In 2018, it invested about 1 trillion won to acquire ZKW, an Austrian automotive headlamp manufacturer.
Researcher Rokho Kim of Hana Financial Investment said, “As the proportion of LG Magna ePowertrainin, which has the highest future growth potential in the VS division, increases, the business value is expected to increase.” It is also a positive part to share our European customers.”
The BS Business Division plans to actively respond to sales opportunities for IT products, expand sales of strategic products such as premium digital signage, and strengthen product competitiveness of solar modules. With the spread of non-face-to-face trends, demand for IT products such as laptops and monitors will continue to increase, but the investment of information displays and solar modules is expected to shrink and price competition will intensify.
The stock market predicted that LG Electronics will achieve record-high performance this year as well.
On this day, the consensus of LG Electronics’ annual sales and operating profit of securities companies was 67,3123 billion won and 3.65 trillion won, respectively. It is predicted that the first quarter of this year will also shine brighter in the high season for home appliances.
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DB Investment & Securities researcher Seong-ryul Kwon said, “This year, LG Electronics’ operating profit can reach 3 trillion won even if there is no specialty as last year. New home appliance blasts and OLED TV sales expansion will be the points to watch.” It is expected to turn to the black in the fourth quarter as sales increase significantly.”
An official from LG Electronics said, “In 2021, it is difficult to expect as much demand as before Corona 19, but in the mid to long term, we will start operating a portfolio to become the No. 1 in the global market.” We will do our best to achieve continuous market growth through internalization of digital capabilities,” he said.