Friday, February 28, 2020
LG Electronics Posts Highest-Ever Sales in 2019 But Cannot Laugh
Operating Profit Falls 10% on Year
LG Electronics Posts Highest-Ever Sales in 2019 But Cannot Laugh
  • By Michael Herh
  • January 10, 2020, 10:59
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LG Electronics' sales reached a record high of 62.31 trillion won (about US$53.7 billion) in 2019, but its annual operating profit fell 10 percent from 2018.

LG Electronics received a disappointing business scorecard in the fourth quarter of last year. The company’s quarterly sales were the second highest-ever and its annual sales are expected to reach an all-time high, but its quarterly operating profit fell short of 100 billion won (about US$86.2 million), about a third of the market's expectation.

LG Electronics announced on Jan. 8 that it posted 16.06 trillion won (about US$13.8 billion) in sales and 98.6 billion won (about US$85 million) in operating profit in the fourth quarter of last year based on consolidated financial statements. Its sales and operating profit increased 1.8 percent and 30.3 percent on year, respectively. The increases stemmed from the base effects. The company delivered an earnings shock in the fourth quarter of 2018 by posting 15.77 trillion won (about US$13.6 billion) in sales and 77.5 billion won (about US$65.3 million) in operating profit.

A consensus among securities firms announced by FnGuide was 16.46 trillion won (about US$14.2 billion) in sales and 279.1 billion won (about US$241 million) in operating profit. Accordingly, LG Electronics failed to meet the consensus in both sales and operating profit. Although its annual sales reached a record high of 62.31 trillion won (about US$53.7 billion), its annual operating profit fell 10 percent from 2018 to 2.43 trillion won (about US$2.1 billion).

LG Electronics posted an operating margin of 0.62 percent in the fourth quarter of 2019. The percentage was the second lowest level since the fourth quarter of 2016 when the company recorded an operating loss. Its operating profit margin was 0.48 percent in the fourth quarter of 2018. LG Electronics posted an operating margin of 4 percent to 6 percent during the first three quarters of 2019.

The blame is put on the sluggish TV business on top of the continued poor performance of the smartphone and vehicle electronics businesses. The securities industry estimates the Home Electronics (HE) Division's operating profit at 100 billion won (about US$86.2 million), lower than an initial estimate of 200 billion (about US$172.4 billion).

In the meantime, LG Electronics maintained the 60 trillion won (about US$51.7 billion) level in sales for three consecutive years by surpassing 60 trillion won in sales in 2019 since hitting the highest-ever sales in 2017.