Business World

LG Electronics Inc posted a smaller-than-expected 25 percent drop in first-quarter operating profit, and said it expected increased sales of mobile phones and air conditioners to drive a recovery in the quarters ahead.

LG, the world’s No.3 mobile phone maker, said its handset margins held up well in the three months ended March, while sales of flat screen LCD TVs jumped by more than a third from a year ago.

An improving brand image and price competitiveness from a weaker won are helping the South Korean company expand market share in mobile phones and LCD TVs at the expense of struggling foreign rivals, even in the midst of the current downturn.

“The results are much better than expected, and its strong line-up in cellphones, home appliances and TVs appears to have helped it gain market share against rivals and outperform in a tough global economic environment,” said Chung Sung-Ho, an analyst at KB Investment & Securities.

“A weaker won has also helped it boost sales and LG is likely to continue to perform well this year.”

LG said it expected to increase total sales by more than 10 percent in the second quarter from the first, boosted by strong revenues from air conditioners, a key unit. LG also said it aimed to increase mobile phone sales by more than 10 percent in the second quarter from the first.

PHONE MARGINS RESILIENT

LG, which trails Nokia and Samsung Electronics in mobile phones, sold 22 faxless payday loan guaranteed.6 million handsets in the first quarter, down from 25.7 million units sold in October-December.

LG posted a 6.7 percent operating profit margin in handsets, up from 5.2 percent in the fourth quarter. Market leader Nokia’s margin was 10.4 percent.

Last week, Nokia reported a 27 percent fall in January-March sales and its first-ever quarterly loss while repeating its forecast for market volumes to decline around 10 percent in 2009.

Fourth-ranked Sony Ericsson posted a 5 percent loss margin from their cell phone operations in the fourth quarter, while No.5 Motorola posted an abysmal 25 percent loss margin.

LG’s global-basis operating profit was 455.6 billion won ($337.1 million) for the quarter to end-March, beating a 307.4 billion won average profit forecast from nine analysts polled by Reuters.

That was down 25 percent from a 605.2 billion won profit a year earlier but improved from a 101.4 billion won profit in the fourth quarter last year.

LG’s first-quarter net loss of 197.6 billion won was also narrower than a 671.3 billion won net loss in the previous quarter when it was hit by sharp losses at its flat-screen joint venture, LG Display Co Ltd.

Its global-basis sales were 12.85 trillion won, in line with forecasts. 

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