LG Electronics to bolster B2B push as competition from China grows

LG's Q3 earnings come to W996b, up 33.5 percent on-year

LG Electronics' headquarters in Yeouido, western Seoul (LG Electronics)

South Korean home appliance giant LG Electronics said Friday it would further develop strategies tailored to each country's consumption patterns and demand to deal with the aggressive global market penetration of Chinese rivals.

"Chinese firms have deviated from a low-cost strategy and are actively investing in each production region, while strengthening their products and brand power," Kim I-kueon, vice president and head of home appliance and air solution business division at LG Electronics, said during the company's earnings conference Friday.

"In response to this, we are planning to come up with customized strategies for each country, comprehensively diagnosing the latest issues and firm’s competitiveness country-by-country,” he added.

The company will decide on markets to focus on, considering the resource investment priorities, market size and the level of competition from Chinese firms, according to Kim's explanation.

"Although it might not be easy to secure profitability from our existing home appliance business alone due to intensifying market competition ... we will maintain the current level of profitability by upgrading our portfolio on fostering new growth engines, strengthening business-to-business segments, and promoting new businesses."

The tech giant has also set its sights on generating over 40 trillion won ($29.5 billion) in sales from its B2B operations by 2030. LG's business-to-business sales currently account for more than 30 percent of the total this year.

Less affected by economic uncertainties than consumer segments, the B2B sector can bring stable sales and profit, the home appliance maker said.

The strategy dates back to July, when LG announced its goal to achieve 100 trillion won in yearly sales by 2030 by transforming itself into a “smart life solution company,” aiming to strengthen its core identity as a top home appliance brand.

Under the goal, the firm’s CEO Cho Joo-wan suggested "accelerating business-to-business connections” as one of the key transformation schemes, alongside "innovating its business model in the non-hardware sector and exploring new business areas such as digital health and electric vehicle charging."

The company said it would continue seeking growth in sales for the rest of this year by expanding sales of its major home appliance products, especially during the year-end holiday season. It also looks to focus more on the EV parts business, a promising future sector.

As the firm projects difficulties amid the high economic uncertainties and intensified market competition, LG plans to focus on securing a stable profit structure through increasing efficiency, based on precise demand forecasts, according to LG Electronics officials.

LG also said it would target the heating, ventilation and air conditioning (HVAC) business, supporting the push for decarbonization and electrification while continuing investments in the EV charging business.

“We will seize additional growth opportunities by focusing on promising business areas that have high future potential and can create synergies with our existing businesses, while accelerating investment and development," an LG Electronics official said.

Meanwhile, LG’s quarterly earnings for the July-September period were announced midday Friday.

The consumer electronics giant said its third-quarter operating profit came to 996.7 billion won on a consolidated basis, up 33.5 percent from the same period a year ago. The figure was much higher than the consensus of 808.4 billion won projected by local analysts, provided by market intelligence firm FnGuide.

The firm’s net income jumped 44.2 percent on-year to 485.2 billion won over the three months. Sales fell 2.2 percent on-year to 20.71 trillion won, surpassing the market consensus of 20.46 trillion won. It was also close to the all-time third-quarter sales record of 21.18 trillion won last year.

The company attributed its solid performance to a more than doubled profit in its home appliance unit and a record-high profit of the future breadwinner vehicle component business despite the global economic slump.

LG's home appliance and air solution unit logged an operating profit of 504.5 billion won, with quarterly sales of 7.46 trillion won in the July-September period.

In response to decreasing demand, LG has strengthened its lineup for middle-income consumers.

Its home entertainment unit, which oversees the company's TV business, posted 110.7 billion won in operating profit and 3.57 trillion won in sales over the cited period, extending a surplus despite a slowdown in demand recovery.

LG's vehicle component solutions business logged an all-time third-quarter operating profit of 134.9 billion won, with record-high quarterly sales of 2.5 trillion won.

The company expects its EV parts business to exceed 10 trillion won in annual sales for the first time this year. The year-end order backlog is also expected to draw nearly 100 trillion won.

Despite the solid third-quarter operating earnings announcement, LG's shares closed at 101,600 won on Friday, down 3.51 percent from the close of the previous session.

By Jie Ye-eun(yeeun@heraldcorp.com)