LG Electronics Posts Larger-Than-Expected First-Quarter Loss

LG Electronics swung to a larger than expected quarterly net loss after another dismal performance at its flat screen operations wiped out strong results at the mobile phone and
appliance units.

A much-expected recovery at LG's liquid crystal display (LCD)-making joint venture should brighten the company's outlook for the rest of the year, but problems at LG's own plasma display panel (PDP) unit could drag earnings down for several more quarters to come, analysts say.

Once dominant in the 40-inch-and-larger category, plasma screens have sustained bruising losses in a price war with LCD panels, and the industry expects LCDs to continue to overwhelm the large-size category.

LG, which competes with local rival Samsung Electronics in handsets, TVs and appliances, on Thursday posted a net loss of 122.6 billion won ($132.3 million) in the quarter ended March.

The result offered a stark contrast with a 150.8 billion profit a year earlier and was much larger than a forecast for a 39.4 billion won loss made by nine analysts polled by Reuters.

The figure reflects the impact of another quarter of red ink at LG.Philips LCD, its 38%-owned LCD joint venture with Dutch Philips, which last week posted 169 billion won in net loss amid a seasonal supply glut.

Operating profit came in at 172.9 billion, much larger than a forecast for 77.9 billion, swelled by strong sales of premium mobile phones. Sales improved to 6.03 trillion won from 5.8 trillion a year ago.

Shares in LG, which has a market value of $10 billion, closed 1.8% lower at 63,300 won. The stock surged 16.7% in the first quarter, beating the KOSPI's 1.3% rise.

The display division posted an operating loss margin of 16%, compared with a profit margin of 2% a year ago and bigger than the fourth quarter's 12% loss.

Analysts say plasma makers have no clear solution but to wait for the industry standard to move to the 50-inch-and-bigger category, where PDPs should have a price advantage.

LG, the world's fifth-biggest mobile phone maker after Nokia, Motorola, Samsung and Sony Ericsson, benefited from strong sales of the company's trademark "Chocolate" slider phone.

LG sold 15.8 million phones in the first quarter, in line with 15.6 million a year before. Operating margins in the division rose to 6.6%, from a revised 1.7% loss a year ago, thanks to better sales of premium models.

Prospects remain bright as LG's metal-encased "Shine" model and futuristic "Prada" models are expected to become big sellers in the second half, analysts say.