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| LG Electronics' headquarters in Seoul / Yonhap |
Analysts optimistic about company's earnings prospects
By Kim Yoo-chul
LG Electronics reported stellar second-quarter earnings results thanks to rising demand for electronic gadgets amid the continued COVID-19 pandemic, while its decision to pull out of the money-losing handset business also helped its bottom line.
LG said Thursday that operating profit surged 65.5 percent year-on-year to 1.11 trillion won for the three-month period that ended on June 30. It was the highest quarterly operating profit seen since the second quarter of 2009. Second-quarter sales also jumped 48.4 percent to a quarterly high of 17.13 trillion won, LG said in regulatory filing to the Korea Exchange (KRX).
Analysts were also impressed by LG's operating profit margin of almost 10 percent during the latest quarter, marking a major turnaround.
The home appliance division reported 6.8 trillion won in quarterly sales, while the division's operating profit came to 653 billion won.
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The TV business reported 4.02 trillion won quarterly revenue and 333 billion won in operating profit. LG Display's brisk second-quarter performance also contributed, as LG Electronics is a major stakeholder. The subsidiary reported an operating profit of over 700 billion won for the second quarter.
In focus now is the performance of LG Magna e-Powertrain, a joint venture between LG Electronics and Canadian auto-parts maker Magna International. LG Electronics allocated employees from its handset division to the newly launched join venture.
The Korea Times was the first to report on LG's moves to work on the specifics of winning an initial volume orders for Apple's first-generation electric vehicle, tentatively named the "iCar." Negotiations between the joint venture and Apple are seeing progress, according to officials and sources familiar with the issue.
"If Apple formally signs with the venture, this will be a huge boost for LG Electronics in terms of diversifying its business portfolios to promising ones," a senior executive of one LG affiliate said.
Toward that path, LG Electronics is streamlining its business structure. LG Chem said it will take over LG Electronics' battery separator business for 525 billion won. LG Chem said it decided to acquire LG Electronics' chemical electronic material (CEM) unit to solidify its leading position in the battery industry.
LG Chem said the deal includes LG Electronics' manufacturing lines in South Korea, Poland and China, as well as about 800 employees and other assets.
Analysts were optimistic about LG Electronics' earnings prospects.
"LG Electronics will focus on improving its portfolios in TVs and home appliances. It will collaborate with LG Energy Solution (LGES) and LG Display to win volume orders for its vehicle components for major carmakers. This strategy does make sense," a senior fund manager at a European investment bank in Seoul said by telephone. LGES is one of the world's leading battery manufacturers, while LG Display supplies OLEDs to Apple and other big-name tech companies.
