LG Electronics sees record earnings in Q3 thanks to strong B2B sales

A rendering of production base for LG Magna e-Powertrain in Miskolc, Hungary. [Courtesy of LG Electronics]

LG Electronics Inc. has managed to rejuvenate its business-to-business (B2B) sector, resulting in record earnings in the third quarter of 2023.

LG Electronics said on Tuesday that its sales and operating profit for the third quarter hit 20.7 trillion won ($15.3 billion) and 99.67 billion won respectively, both the highest levels ever for any third quarter to date. The operating profit in particular saw a remarkable increase of over 30 percent compared to the same quarter of the previous year, significantly surpassing market expectations.

This operating profit is the second highest in the company’s history, following the 1.07 trillion won achieved in 2020. It also exceeded market forecasts by 20.2 percent.

The most significant contributors to this robust performance were B2B transactions in auto parts as well as heating, ventilation, and air conditioning (HVAC) systems.

The auto parts business achieved these results by focusing on in-car infotainment, electric vehicle (EV) components and automotive lighting. “The division has recently outperformed its order targets, especially in digital cockpits, central information displays, and LG Magna’s EV motors, which are expected to be at the forefront of future growth,” according to Hi-Investment & Securities Co. analytics.

For example, the order book for the company’s vehicle components solution unit grew from 55 trillion won in 2020 to 80 trillion won in late 2022 and is expected to further increase to 100 trillion won by the end of 2023. Considering that the industry typically requires two years of research and development (R&D) after an order is placed before it becomes recognized as revenue, the revenue from auto parts is poised to soar starting in 2024, with KB Securities Co. forecasting the company’s auto parts sales will hit 13 trillion won next year.

Meanwhile, LG Electronics is also expediting the establishment of regional production facilities and has recently announced plans to construct a fourth production base for LG Magna e-Powertrain in Miskolc, Hungary. In a recent interview, LG Electronics Chief Executive Officer Cho Joo-wan emphasized the company’s goal for approximately 23 trillion won of annual sales to come from its vehicle solutions business by 2030.

In the home appliance sector, the company’s expansion of B2B products, such as built-in appliances and system air conditioners, significantly contributed to its strong performance. LG Electronics plans to grow its HVAC business further to include heat pumps and energy storage systems (ESS), responding to the increasing demand for eco-friendly and high-efficiency products, particularly in North America and Europe.

LG Electronics aims to boost its home appliance sales to over 20 percent this year by targeting the B2B market, particularly air conditioners. The company recently provided dedicated outdoor air systems (DOAS) to some of the e-commerce platform Coupang’s new fulfillment centers. DOAS is an air conditioning product that is still relatively new in Korea and is designed for outdoor air conditioning.

However, the company’s TV business has faced challenges in improving profitability due to weak demand in the premium TV market. On Tuesday, despite a bearish market, LG Electronics saw its stock price rise by more than 7 percent to surpass the 100,000 won mark.