LG Electronics expects to report an operating profit of KRW505.2 billion ($439 million) in its Q1 2016 results, indicating the company’s best quarter for two years, with earnings apparently fuelled by growth in its television and home appliance businesses rather than mobile.
In its preliminary earnings statement for Q1 2016, the company said operating profit will be 65.5 per cent higher year over year, up from KRW305.2 billion reported in Q1 2015. Revenue however is expected to dip slightly to KRW13.4 trillion, down 4.5 per cent year on year.
LG, which announced an official earnings estimate reportedly for the first time, will release its full earnings later this month. The company did not provide any other indicators for its quarterly profit.
Lee Jae Yun, an analyst at Yuanta Securities Co, told South Korea’s Yonhap news agency the rise in profitability comes due to a renewed focus by the company on its premium products.
“The rising presence of premium models in TVs and home appliance sales led to the improved profitability,” he said. “The falling prices of panels is presumed to have reduced the production costs of TVs.”
Mobile expected to struggle
LG also did not give any indicators on its mobile business, following the launch of its flagship G5 smartphone in March, but analysts apparently expect it to report a third consecutive quarterly loss in Q1.
Speaking to Reuters, S.R. Kwon, analyst at Dongbu Securities, believes total company profit could however be further boosted in Q2 2016 if the company is able to make the G5 successful, once sales of the new smartphone are fully factored in.
“If the mobile communications [unit] can turn a profit in the second quarter, we’ll see a record quarterly profit of more than KRW600 billion,” claimed Kwon.
The company has undertaken an aggressive marketing campaign to promote the G5, after unveiling the smartphone at this year’s Mobile World Congress.