: South Korea
LG Electronics Inc forecast sales and profits would improve in the first
quarter as the global economic recovery prompts consumers to spend more on TVs,
phones and other electronic appliances.
The world's second-biggest TV brand and
No.3 mobile phone maker posted a higher-than-expected operating profit in the
fourth quarter on Wednesday but shares were at an 8-week low, weighed down by
quarterly net profits, released a day earlier, that were below expectations.
"I don't see a big problem ahead this
year on the company's fundamentals if you see growing demand for mobile phones
and flat-screen TVs. If demand continues to grow, its top and bottom line
should be better this year," said Tom Tang, an analyst at Masterlink
Investment Advisory in Taipei
The main challenge this year will be
tougher competition in smartphones, where LG has a relatively weak line-up
against leaders Apple Inc and Research In Motion Ltd, and a firmer won, which
impacts its earnings overseas."LG's smartphone line-ups are not
doing well, and it seems it will take some time before LG's smartphones become
more competitive in markets," said Chun Seong-hoon, an analyst at Eugene
Investment & Securities in Seoul
"While its TV unit has been doing
well, it may not be the case this year, as Japanese rivals are fast catching
LG and local rival Samsung Electronics Co
Ltd expect a broader recovery in consumer spending worldwide, especially in
developed markets, after they weathered last year's downturn thanks to demand
But they face tougher competition from
Japanese TV rivals such as Sony Corp and Panasonic Corp, which are beefing up
their offerings to claw back market share.Ahead of LG's results, analysts were expecting
the firm to post a 7 percent rise in net profit to 2.2 trillion won in 2010,
according to Thomson Reuters I/B/E/S.
Strong flat-screen TV sales helped LG
Electronics more than quadruple October-December operating profit, though
earnings fell from the previous quarter as the costs of an aggressive marketing
campaign dented its mobile phone business.
"Demand is expected to rise as the
global economy emerges from recession and LCD TV sales will continue to
grow," LG said, referring to its first-quarter outlook.
The company, which competes with Samsung in
mobile phones, TVs and appliances, reported a 446.7 billion won ($385.4
million) operating profit for October-December, topping a forecast for 355.5
billion won from Thomson Reuters I/B/E/S.
Late on Tuesday, LG reported fourth-quarter
net profit of 297.2 billion won, well short of analysts' forecasts.
October-December global sales, which
include sales from LG and its overseas units, rose 7 percent to 14.27 trillion
won, above a consensus forecast.
The operating profit margin on mobile
phones, where LG trails Nokia and Samsung, shrank to 1.7 percent from 8.8
percent in the third quarter, hit by marketing costs and clearing inventory.
Mobile rival Sony Ericsson last week
reported a seventh straight quarterly loss and warned that a recovery in the
cellphone market could be slower than expected.Bureau Report
First Published: Wednesday, January 27, 2010, 15:48