Bloomberg News

LG Electronics Posts Wider Loss on EU Fines, TV Slump

January 30, 2013

LG Electronics Reports Net Loss of $432 Million

LG Electronics Inc. computer screens using LG Display Co. panels are displayed at the company's flagship store in Seoul, South Korea. Photographer: SeongJoon Cho/Bloomberg

LG Electronics Inc. (066570), the world’s second-largest TV maker, unexpectedly reported a wider fourth- quarter loss on European Union price-fixing fines, slumping demand and a stronger won.

The net loss was 468 billion-won ($432 million), compared with a 112 billion won loss a year earlier, Seoul-based LG said in a statement today. The company was expected to make a profit of 88.8 billion won, based on the average of 21 analyst estimates compiled by Bloomberg. Sales were 13.5 trillion won.

The company and larger South Korean rival Samsung Electronics Co. (005930) suffered as the nation’s stronger currency hampered efforts to compete against Japanese suppliers including Sony Corp. in the slowing global TV market. LG, which gets about half of its sales from TVs, was also fined 491.6 million euros ($660 million) by EU antitrust regulators in December after an industrywide probe of cathode-ray tube sales.

“The TV business is unlikely to show any meaningful rebound in the near term, as the global economy is still frail,” Choi Nam Kon, a Seoul-based analyst at TongYang Securities, said before the release. “The weakening yen isn’t helpful either.”

LG made an operating profit, or sales minus the cost of goods sold and administrative costs, of 107.2 billion won compared 85.6 billion won. The TV-maker earns about 80 percent of its revenue overseas.

Earnings in the current quarter will decline from a year earlier because of slower demand for TVs and price cuts, Chief Financial Officer David Jung said at a briefing in Seoul. The company will also increase its marketing spending for mobile devices, he said.

Sales Forecast

The company, which also produces mobile phones, air conditioners and appliances, expects full-year sales of 53.5 trillion won in 2013. That’s up from 51 trillion won last year, when the company posted net income of 91 billion won. Capital expenditure will total 2.5 trillion won.

The TV-maker closed unchanged at 73,500 won in Seoul trading, compared with a 0.4 percent gain for the benchmark Kospi Index.

LG’s home-entertainment division, which includes TVs, had an operating profit of 19.2 billion won in the fourth quarter, compared with 168.2 billion won a year earlier. It shipped 9.25 million flat-screen TVs in the period. Global TV shipments probably fell more than 4 percent last year and will be little changed in 2013, researcher DisplaySearch said Oct. 24.

LG plans to increase its share of the high-end TV market by promoting ultra-HD and organic light-emitting diode, or OLED, sets, it said.

Mobile-Phone Earnings

The company’s mobile-phone unit had a fourth-quarter operating profit of 56.3 billion won, compared with an 800 million won loss a year earlier. The home-appliances division had a profit of 79.9 billion won, an 8.1 percent decline from a year earlier. The air-conditioner business had a loss of 11.1 billion won, compared with a 31.8 billion-won loss a year earlier.

Samsung said Jan. 25 the stronger won will probably cut operating profit by at least 3 trillion won this year. It also said global demand for smartphones will probably slow in 2013.

The yen plunged about 10 percent against the dollar in the fourth quarter, the most among major Asian currencies tracked by Bloomberg, boosting earnings at Japanese exporters. The won jumped 4.4 percent in the period, curbing the repatriated value of overseas sales for Korean companies.

The EU also fined Philips Electronics NV, Panasonic Corp. and Toshiba Corp. following its investigation into a cartel for making now-obsolete cathode-ray tubes. The 1.47 billion euros of penalties was a record for the regulator.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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