LG Electronics estimates record Q2 revenue led by strong B2B business

LG Scienece Park in western Seoul [Photo by Yonhap]

South Korea’s LG Electronics Inc. delivered record second-quarter revenue as sales from its business-to-business (B2B) division, including those of electronic devices, improved despite the slow economy.

In its earnings guidance released on Friday, LG Electronics estimated its operating profit at 892.7 billion won ($687.5 million) for the April-June period, up 12.7 percent on year and down 40.4 percent on quarter, on sales of 19.9 trillion won, up 2.7 percent on year and down 2 percent on quarter. The tech giant achieved the highest sales for the second quarter and the second-highest operating profit.

The 12.7 percent on-year surge in operating profit comes as LG Electronics has been putting efforts to seek fundamental improvement in its businesses by operating an emergency organization called the War Room.

The second-quarter results include non-operating costs such as voluntary retirement expenses. Analysts noted that the operating profit of its business performance only surpasses market expectations.

For the first-half results, sales were the second-highest and operating profit was the third-highest so far for the period. LG Electronics’ sales in the first six months topped 40 trillion won for the second straight year and operating profit during the same period exceeded 2 trillion won for the third straight year.

Although detailed performance by business division was not disclosed in its earnings guidance, strong results are likely attributed to the improved B2B business and high sales of its premium home appliances. The company’s vehicle component solutions (VS) business has also become stable and contributed to the profit improvement.

In B2B business, analysts noted that LG Electronics is likely to have achieved double-digit on-year growth in system air conditioner sales for the second quarter.

The electronic devices business, a major B2B business, is also estimated to have helped drive up earnings. The company is likely to have achieved strong performance in the independently-developed infotainment sector and in power trains led by LG Magna e-Powertrain, a joint venture established by LG Electronics and Magna International. ZKW, a subsidiary of LG Electronics specializing in automotive lighting systems, also posted strong growth.

The order balance of LG Electronics’ VS business topped 80 trillion won at the end of March, up from the 55 trillion won level in 2020. Industry expected the balance to reach up to 100 trillion won this year on improved competitiveness.

LG Electronics’ electronic devices business, in the meantime, is expected to emerge as the company’s second-major business sector in 2025, following home appliances on the back of strong demand for electric vehicles. LG Magna e-Powertrain that supplies electric motors, in particular, is projected to achieve an annual average growth of more than 50 percent between 2020 and 2025.

LG Electronics is also estimated to have achieved strong sales in high-efficiency products such as dehumidifiers and air conditioners amid the sultry weather and rainy season forecast. Sales of dehumidifiers are expected to have more than doubled in the first six months of this year from a year ago.

Sales of LG Electronics’ TV business, however, are estimated to have declined in the second quarter from a year ago as competition intensifies amid a delayed recovery in global demand.