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LG profits up, mobile shipments down, in Q1 2011 earnings

Updated Dec 19th, 2018 7:12PM EST

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LG struggled in 2010, but it’s slowly righting the ship in 2011. The firm reported its Q1 2011 earnings on Wednesday, and its operating profit of 131 billion won was the first positive return in the past three quarters. LG attributed the change to successful cost-reduction efforts and steady performance across all four of its businesses. The firm reported 13.2 trillion won in revenues, a 0.4% decline year-over-year. Its LG’s mobile communications business posted a loss of 101 billion won, an improvement over the 261 billion won loss the firm noted during the same period in 2010. Handset sales were down 9.2 percent year-over-year and 14.3 percent quarter-over-quarter, and the firm said it shipped 24.5 million phones, a 10% drop year-over-year and a 20% decline quarter-over-quarter. LG hopes the launch of its Optimus Black and Optimus 3D handsets will improve those figures during Q2. Despite shipping more televisions in Q1, the world’s second largest TV manufacturer attributed its 20.6% decline in home entertainment sales to slower demand and a decline in average selling price. LG’s home entertainment company posted an 82 billion won operating profit during the first quarter, which LG said was fueled by its line of 3D and Smart TVs, as well as cost cutting measure the company has taken. Hit the jump for the full release.

Profit Recovery on Track with Strong Line-up of High-End Products
and Results of Aggressive Cost Saving Efforts
SEOUL, Apr. 27, 2011 –- Showing significant progress on its profit recovery, LG Electronics (LG) today announced unaudited financial results for the three-month period ending March 31, 2011. Stronger operating profits reflected successful cost-reduction efforts and steady performance in all four business units. The company expects to see further growth with strong line-up of strategic products such as the CINEMA 3D TVs adopting Film Patterned Retarder (FPR) technology and smartphones under the LG Optimus brand.
Sales and Profit
LG posted consolidated first quarter 2011 revenues of KRW 13.2 trillion (USD 11.7 billion) a 0.4 percent decline in won from the same period last year (up 2 percent USD). After two consecutive quarters of losses, operating profit turned the corner with KRW 131 billion (USD 116 million). LG recorded a KRW 16 billion (USD 14 million) net loss this quarter mainly due to a KRW 56 billion loss (USD 50 million) on investments in affiliated
LG Home Entertainment Company posted a revenue decrease of 4.8 percent to KRW 5.3 trillion (USD 4.7 billion) compared with the first quarter of 2010, reflecting slower demand and average selling price decline. However, LG shipped more flat panel TVs in the first quarter, 6.8 million units, a 13 percent increase from the same period last year. Thanks to cost-cutting efforts, the company saw progress in its turnaround quarter-overquarter, posting a KRW 82 billion (USD 73.1 million) operating profit in the first quarter. An aggressive product line-up, led by CINEMA 3D TVs and Smart TVs, is expected to continue to drive profits and expand market share for the Home Entertainment business.
LG Mobile Communications Company first-quarter revenues decreased by 8.3 percent year-over-year to KRW 2.9 trillion (USD 2.6 billion). While overall handset shipments declined quarter-over-quarter as a result of slow seasonality, operating profit showed significant improvement in the first quarter due to an increase in smartphones in the company’s portfolio and reduction in overhead costs. The company expects to improve its product mix by launching new smartphones including the LG Optimus Black and the LG Optimus 3D and gain profitability by further cutting costs.
LG Home Appliance Company saw 13.4 percent increase in revenues year-over-year with KRW 2.7 trillion (USD 2.4 billion). First-quarter 2011 operating profit was KRW 103 billion (USD 91 million). Revenues increased in the overseas markets due to strong sales in North America and continuous growth in emerging markets such as Russia, India and other Asian markets. The company will continue to launch market-leading products while investing in new business areas and maintain profitability despite concerns over some component availability in the aftermath of the Japan earthquake and rise in raw material costs.
LG Air-Conditioning and Energy Solution Company first-quarter revenues grew 23.8 percent year-over-year to KRW 1.45 trillion (USD 1.3 billion) with operating profits of KRW 39 billion (USD 35 million). The company saw strong growth in Korea, the Americas and CIS markets with strategic offerings such as Multi V commercial air conditioning and Inverter products. Despite potential risks with political instability in the Middle East and Africa and cooler than expected weather in Asia, the company expects to see a growth in demand for both residential and commercial air conditioners as the peak selling season approaches. Continuous investments in LG’s business-to-business infrastructure and new business opportunities are expected to fuel the company’s longterm growth.
2011 2Q Business Direction and Prospects
LG Electronics expects to see solid growth in the second quarter of 2011 with the start of the high season for air conditioners, continued momentum in home appliances, and aggressive global sales of LG CINEMA 3D TVs and Optimus smartphones. LG will continue to introduce new products in major categories including smartphones while investing persistently in R&D and marketing.
2011 1Q Exchange Rates Explained
LG Electronics unaudited earnings results are based on IFRS (International Financial Reporting Standards). 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 1,123 per USD (2011 1Q) and KRW 1,145 per USD (2010 1Q).