LG Electronics has reported an earnings shock for the fourth quarter, with an 80 percent on-year drop in operating profit for the quarter and a nearly 90 percent drop from the previous quarter, mainly weighed down by the tech firm’s lackluster smartphone and premium TV sales.
The disappointing fourth-quarter performance in preliminary earnings announced late Tuesday also overshadowed the company’s yearly operating profit of 2.73 trillion won ($2.43 billion), the highest in 10 years. Total revenue for the whole year reached 61.34 trillion won, the second-largest figure on record after 2017.
In the fourth quarter alone, LG Electronics posted operating profit of 75.3 billion won, down from 366.8 billion won in the same period in 2017. Its revenue also declined 7 percent to 15.8 trillion won during the three months.
Kwon Bong-seok, president of LG’s home entertainment and mobile communications division, said while the fourth quarter was a tough period for the company, things would improve early this year.
Kwon Bong-seok, president of LG’s home entertainment and mobile communications division.
“When it comes to TVs, there was a regional issue. There were countries that we couldn’t do business with at all, like Iran,” Kwon told reporters Tuesday during his visit to Consumer Electronics Show 2019 in Las Vegas, referring to restrictions arising from sanctions against Iran by the US.
“However, in terms of the competitive edge and cost structure, I think our fundamentals remain strong. I’m confident that things will get back to normal in the first quarter,” Kwon said, explaining that efforts were underway with the governments of the US and Iran to minimize the impact.
During the conference, Kwon also discussed the firm’s next big technologies -- namely, rollable displays, 8K and artificial intelligence.
LG grabbed the attention of spectators and the press on Monday by revealing the first rollable television, the LG Signature OLED TV R. Kwon said it was only one of many examples of how a rollable display could be used, even for smaller devices like tablets. Responding to criticism that such a high-tech display might be too costly to generate a viable market, Kwon expressed confidence, saying the firm had the ability to mass-produce the displays and would soon make production more price competitive.
Meanwhile, analysts said LG’s fourth-quarter underperformance stemmed from intensified competition in the global market affecting the company’s TV and smartphone divisions, although LG has not disclosed further details about its fourth-quarter operations. The final results are to be delivered later this month.
“It is well below our estimate and market consensus,” said Ko Jung-woo, an analyst at NH Investment & Securities. “While we don’t have detailed performance data for each department, TV and mobile performance appears to be below our expectations.”
Analysts had estimated that LG electronics’ operating profit would hover above 380 billion won. In an IBES Refinitiv poll, 11 analysts estimated an average of 387 billion won for its operating income in the fourth quarter, according to Reuters.