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LG Electronics’ Q4 Operating Profit Plunges 80% on Chronic Losses from Smartphone Business
An Earnings Shock from LG Electronics
LG Electronics’ Q4 Operating Profit Plunges 80% on Chronic Losses from Smartphone Business
  • By Kim Eun-jin
  • January 9, 2019, 10:01
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LG Electronics delivered an earnings shock by recording an 80 percent plunge in operating profit in the fourth quarter of 2018.

LG Electronics Inc. has delivered an earnings shock as the company’s operating profit fell far below the market estimate in the fourth quarter last year.

The company said in a regulatory filing on Jan. 8 that its estimated sales reached 15.77 trillion won (US$14.01 billion) and operating profit 75.30 billion won (US$66.87 million) in the October-December period.

The company's fourth-quarter sales and operating profit plunged by 7 percent and 79.5 percent, respectively, compared to a year earlier. The quarterly guidance report's operating profit hovered way below the securities market's estimate of 400 billion won (US$355 million).

However, on a yearly basis, the company's performance improved. LG Electronics recorded annual sales of 61.34 trillion won (US$54.48 billion) and operating profit of 2.70 trillion won (US$2.40 billion) in 2018. The company’s sales exceeded 60 trillion won (US$53 billion) for two years in a row but the figures fell by 0.1 percent from 61.40 trillion won (US$54.50 billion) a year ago. Its operating profit increased by 9.5 percent from 2.47 trillion won (US$2.19 billion) a year earlier. LG Electronics logged an all-time high operating profit last year for the first time in 10 years after 2.68 trillion won (US$2.38 billion) in 2009.

The company suffered a drop in the operating profits of the home appliance and television businesses, which are its flagship businesses, as it spent more money on marketing to keep its competitors in check and demand in emerging countries, including South America, fell.

Market watchers attributed the earnings shock to massive losses in its mobile communications (MC) division, which produces smartphones. Securities firms, including Mirae Asset Daewoo Co., estimates LG Electronics’ operating losses in the MC division at 170 billion won (US$151 million). The company extended the streak of losses to 15 quarters.