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LG loses money selling smartphones despite hot sales

Published Oct 24th, 2013 9:30PM EDT
LG Q3 2013 Earnings

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Samsung still looks like the only company consistently turning a profit selling Android phones these days. LG revealed in its third-quarter earnings report on Thursday that its mobile division actually lost money in Q3 and posted a -2.6% operating margin despite shipping an impressive 12 million smartphones. Even though LG’s $2.75 billion in mobile sales represented a 24% increase over mobile sales from Q3 2012, the company said that it still lost money in mobile due to “increased competition and higher marketing investments.” Looking forward, LG says it “plans to focus on increasing sales of new premium products such as the LG G2 smartphone during the peak holiday season as well as maximizing 3G and mid-tier mass devices such as the L II Series and F Series.” The company’s full press release follows below.

LG announces third-quarter 2013 financial results

Sales of Mobile Devices Increase 24 Percent From Same Period Previous Year

SEOUL, Oct. 24, 2013 – LG Electronics Inc. (LG) today announced third-quarter 2013 consolidated revenues of KRW 13.89 trillion (USD 12.51 billion). While competitive conditions in the TV sector and an unfavorable foreign currency exchange rate affected overall revenues compared with the 2012 third quarter, sales of mobile devices increased year-over-year by 24 percent. LG saw a 27 percent increase in third-quarter operating profit to KRW 217.80 billion (USD 196.34 million) compared with the same period last year.

The LG Home Entertainment Company reported revenues of KRW 5.01 trillion (USD 4.50 billion), a 7 percent decline from the same period a year ago, reflecting slower global TV demand and lower selling prices. Higher sales in developing markets such as Asia and the CIS region were offset by softness in Europe. Operating profit of KRW 124.40 billion (USD 111.68 million) increased both year-over-year and quarter-over-quarter as a result of more efficient management of operating and marketing expense. As it enters the holiday selling season, LG plans to expand global sales of premium products such as OLED TVs and Ultra HD TVs while continuing to carefully manage costs.

The LG Mobile Communications Company’s third-quarter revenues increased by 24 percent compared with the same quarter a year ago to KRW 3.05 trillion (USD 2.75 billion). The company shipped 12 million smartphones in the third quarter but profitability and average selling price were affected by increased competition and higher marketing investments. LG plans to focus on increasing sales of new premium products such as the LG G2 smartphone during the peak holiday season as well as maximizing 3G and mid-tier mass devices such as the L II Series and F Series.

The LG Home Appliance Company recorded revenues of KRW 2.97 trillion (USD 2.68 billion), up 3 percent from the previous year largely due to the positive reception of its new washing machines and refrigerators. LG appliance sales increased in North America and China but slowed in developing markets. Despite higher overall revenues and improved cost structure, third-quarter operating profit decreased from the same period last year to KRW 109.20 billion (USD 98.17 million) primarily due to unfavorable foreign exchange movements.

The LG Air Conditioning and Energy Solutions Company reported relatively flat third-quarter sales and operating profit margin year-over-year with revenues of KRW 973 billion (USD 876.32 million). While increased R&D investments and weak global market conditions will continue to impact the business, the company will focus on growing its market share of non-seasonal products and higher-margin products such as new commercial air conditioning systems.

Brad Reed
Brad Reed Staff Writer

Brad Reed has written about technology for over eight years at BGR.com and Network World. Prior to that, he wrote freelance stories for political publications such as AlterNet and the American Prospect. He has a Master's Degree in Business and Economics Journalism from Boston University.