LG Electronics sees Q1 recovery
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LG Electronics sees Q1 recovery

Last Updated: Wednesday, January 27, 2010, 15:48
 
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LG Electronics sees Q1 recovery
Seoul: South Korea's 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 up." 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 from China. 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


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