LG Elec Q1 profit sinks, TV pain outweighs phone revival

Friday, 26 April 2013 03:59 - - {{hitsCtrl.values.hits}}

TV profits fall to 29.8 b won from 164 b won year ago
Phone business improves on record smartphone shipment

SEOUL (Reuters): LG Electronics Inc, the world’s No.2 TV maker, said quarterly profit fell 13% as sharp price cuts resulted in razor-thin margins for its TV division, overshadowing a strong recovery in smartphones.

Since late last year, LG and bigger rival Samsung Electronics Co have had to contend with unfavourable currency rates that benefit Japanese rivals, while global demand for TVs is expected to plateau this year as many consumers in developed countries already own a flat-screen TV.

Smartphones sales jumped to a record 10.3 million units, helped by new high-end models. LG has overtaken Taiwan’s HTC Corp to become the world’s No.3 smartphone maker by sales in the fourth quarter, although its 3.2% market share is still dwarfed by Apple Inc and Samsung.

LG said January-March operating profit fell to 349 billion won ($311.34 million), above a consensus forecast for 289 billion won from 35 analysts surveyed by Thomson Reuters I/B/E/S.

That compares with 402 billion won a year ago and 117 billion won in the previous quarter. It marks its first profit decline in year-on-year terms in five quarters after 2011 and 2012 results were revised to reflect accounting changes.

While its TV troubles may not match the dire straits faced by Japanese rivals Sony Corp and Panasonic Corp , both of which are downsizing their television businesses, LG’s profit margins have slipped to below 1% since the third quarter, compared with nearly 6% in the second quarter of last year. TV profits for LG tumbled 82 percent to 29.8 billion won.

Its mobile business’ profit improved to 133 billion won from a 31 billion won profit a year ago and 56 billion won in the fourth quarter.

But that recovery, which has helped propel its share price 18% higher in the last three months, could slow again. Samsung introduces the latest version of its flagship Galaxy S this week and Apple is widely expected to launch a cheaper iPhone this year.

Its shares fell 0.4% after the results, compared to a 0.8% decline for the broader market.