LG Electronics Posts Strong Profit on Handsets, LCD

LG Electronics posted an 84 percent jump in quarterly earnings, helped by high margins on mobile phones, brisk sales of TVs and solid results at its LCD joint venture.

Lee Jin-man / AP

But the South Korean company said it expected revenue to fall slightly in the third quarter, citing weak seasonal demand for appliances and the impact of the global economic slowdown. 

Still, LG is expected to put in a strong performance for the rest of the year on the back of its resilient mobile phone division, boosted by a weaker won currency that has made its exports more competitive.

LG's 2008 net profit on a parent basis is forecast to more than double to 2.53 trillion won, according to 25 analysts polled by Reuters Estimates.

LG, which owns 38 percent of LG Display, benefited from another banner quarter at the world's No.2 LCD maker, which on June 9 posted a quarterly net profit that more than trebled from a year ago.

LG posted April-June net profit of 707 billion won ($696.5 million) versus 385 billion won a year ago, missing a forecast for 802 billion won by 10 analysts surveyed by Reuters.

Quarterly revenue on a global basis was 12.7 trillion won, up 22 percent from last year. Operating profit on a global basis climbed to 856 billion won from 464 billion won.  

Shares in LG, which has a market value of about $16.35 billion, were up 5 percent to 114,500 won by 0515 GMT after climbing as much as 6.9 percent before the announcement, outpacing the wider market's 3.71 percent gain.

LG, the world's fourth-largest mobile phone maker after Nokia , Samsung Electronics and Motorola , and ahead of Sony Ericsson, sold a record 27.7 million phones in the second quarter, from 24.4 million in January-March.

Second-quarter operating profit margin in handsets was 14.4 percent on a global basis, versus 13.9 percent in the first quarter.

LG's results offer a strong contrast with smaller rival Sony Ericsson, which last Friday posted a 2 million euro ($3.17 million) quarterly operating loss, hit hard by a fall in demand for its more expensive phones, and predicted a tough road ahead.

LG's own display division, which makes plasma panels, posted a 1 percent profit margin on a global basis after suffering heavy losses for most of the past year.

LG shares fell 6.7 percent in April-June against the KOSPI's 1.7 percent fall, amid growing concerns over the global economy.

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