LG sees 'difficult' 2Q in handsets

Korean consumer electronics company clocks 46 percent growth in net profits, thanks to strong performance in home entertainment, but mobile communications revenue dip 28.5 percent.
Written by Eileen Yu, Senior Contributing Editor

LG Electronics posted a 46 percent increase in net profit for the second quarter of 2012 year-on-year, but its mobile business saw revenue dipped by 28.5 percent.

In a statement released Wednesday, the Korean consumer electronics company said its focus on developing markets, offering more premium products as well as "aggressive cost reductions" helped boost its second-quarter net profit to 159 billion won (US$138.02 million).

Overall revenue, however, fell 10.6 percent year-on-year to 12.86 trillion won (US$11.16 billion) due to falling feature phone sales and weak demand for IT products.

LG said its mobile communications business "struggled somewhat" with a operating loss of 57 billion won (US$49.48 million) which the company attributed to greater marketing expenses. Revenue from this business also dipped 28.5 percent to 2.32 trillion won (US$2.01 billion) over the same quarter last year. Smartphone shipments, however, climbed to account for 44 percent of unit sales compared with 36 percent the previous quarter, the company said, pointing to LTE phones as the saving grace.

It added that new LTE models were slated for launch in the second half of 2012 in developed LTE regions, including parts of Asia and Europe, as well as North America.

LG said stronger performance in its home entertainment and home appliances business units helped offset the profit decline in mobile. Boosted by increased sales of more premium products and improved supply chain management, its home entertainment business saw operating profit grow two-fold year-on-year to 216 billion won (US$187.5 million).

Operating profit from home appliances almost tripled to 165 billion won (US$143.23 million) over second-quarter last year, while revenue grew to 2.88 trillion won (US$2.5 billion) boosted by growth in developing markets.

LG's dismal mobile business contrasts with its Korean rival Samsung, which sold over 10 million units of its Galaxy S III model since its launch in May. The latter is also expected to lead China's mobile phone market this year.


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