LG Elecs Q2 OP off 59% on qtr and 12% on yr on higher raw material prices

[Photo by MK DB]

South Korea¡¯s LG Electronics Inc. on Thursday projected 59 percent plunge in operating income to 791.7 billion won ($698.9 million) in the second quarter versus its strong first-quarter figures on surge in raw material prices and slowed demand for high-end consumer appliances.

In its earnings guidance for the April to June period, LG Electronics reported an operating profit of 791.7 billion won, sinking 59.3 percent from the first quarter and 12 percent from the same period last year.

Revenue was estimated at 19.47 trillion won, off 7.1 percent on quarter but up 15 percent on year.

Its performance hovered below market consensus of 863 million won in operating profit estimated by local market tracker FnGuide.

On Thursday, shares of LG Electronics closed up 3.01 percent at 95,900 won.

DB Financial Investment estimated the operating margin of LG Electronics¡¯ mainstay Home Entertainment (HE) division to have hit as low as 0.5 percent in the second year versus 8.2 percent a year ago and 4.6 percent in the previous quarter.

The company will release its detailed official earnings later.

LG¡¯s vehicle components solutions (VS) division is highly speculated to have seen its first profit since it was launched in 2013 as it saw a surge in orders from supplying in-vehicle infotainment (IVI) systems and plastic OLED (P-OLED) to Mercedes Benz electric vehicles. The operating profit of the VS division is estimated at around 40 billion won and the order backlog is expected to go up by 10 percent to 67 trillion won this year from 61 trillion won last year.

The business solution (BS) division with its B2B business, recorded a deficit during the latter half of last year but is also expected to have relatively positive earnings.

According to DB Financial Investment, the OLED TV market is expected to grow during the second half of this year which will contribute to a turnaround in overall TV sales.

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