LG Electronics Q4 operating profit collapses on slumping demand, rising cost

January 27, 2023

LG Electronics Inc. said Friday its operating profit for the fourth quarter nosedived more than 90 percent on a drop in demand for home appliances and rising promotion cost amid global macroeconomic woes.

The tech firm said operating income for the three months ending in December fell 90.7 percent on-year to 69.3 billion won (US$56.2 million), 74.8 percent lower than the average estimate by Yonhap Infomax, the financial data firm of Yonhap News Agency.

It reported a net loss of 212.4 billion won for the October-December period, turning from a profit of 21.3 billion won a year earlier.

Sales increased 5.2 percent to 21.85 trillion won.

The company said pandemic-driven pent-up demand for home appliances, including TVs, has lost steam, and aggressive rate hikes in major economies to tamp down inflation have significantly weakened consumer spending power.

Global TV shipments are estimated to have dropped 3.9 percent on-year to a decade low of 202 million units last year, according to industry tracker TrendForce.

The research firm said the growth momentum of TV shipments will be severely constrained this year as well due to high inflation and economic slowdown in the United States, Europe and China, major TV markets.

This file photo provided by LG Electronics Inc. on July 13, 2021, shows the company's new indoor-outdoor delivery robot. (PHOTO NOT FOR SALE) (Yonhap)
This file photo provided by LG Electronics Inc. on July 13, 2021, shows the company’s new indoor-outdoor delivery robot. (PHOTO NOT FOR SALE) (Yonhap)

But LG’s electric vehicle (EV) parts business made a turnaround 10 years after it entered the market.

At CES 2023 in Las Vegas earlier last month, Eun Seok-hyun, president of LG’s vehicle component solutions division, said he expected the EV business to grow significantly this year to top 10 trillion won in sales.

“The EV parts business is in a period of rapid change where technologies of many other industries are integrated and converge.”

He said LG has a competitive edge over other industry players with its excellent expertise in customer experience.

“Based on that, we can proactively make suggestions on made-to-order products for our customers,” Eun said.

LG Electronics CEO Cho Joo-wan also showed confidence that the EV business will serve as a strong force behind the company’s business growth going forward.

“Now that the business is on the highway, all there is left to do is to step on the accelerator,” he said during CES 2023.

Negative external factors, including logistics costs, have shown signs of easing, Cho said, adding, “Things have improved greatly … and I think business will start to get better from the first quarter.”

For all of 2022, LG posted 3.55 trillion won in operating profit, compared with 4.05 trillion won from the previous year. Annual sales rose 12.9 percent to a record high of 83.46 trillion won.

During an earnings call, LG said it will take some time for consumer sentiment that has weakened due to decreased disposable income triggered by inflation to recover.

LG said it will continue to enhance the competitiveness of its premium products, including organic light-emitting diode (OLED) TVs, and try to maximize the effects of decreased raw material prices and logistics costs.

Despite difficult macroeconomic environments, LG said it will invest around 22 trillion won this year, similar to last year, in identifying new promising areas and diversifying its business portfolio. But it plans to minimize unnecessary investments to secure financial health, the company said.

LG Electronics shares gained 0.2 percent to close at 98,100 won Friday, underperforming the wider market’s 0.62 percent gain.