Resilient Company Weathering Storm of Global Public Health, Economic Crises
August, 2020— LG Electronics Inc. (LG) second-quarter 2020 financial results were affected significantly by the worldwide impact of the pandemic. Consolidated revenue of KRW 12.83 trillion (USD 10.51 billion) was 17.9 percent lower than the same period of 2019, while operating profit of KRW 495.4 billion (USD 405.65 million) declined 24.1 percent from last year’s record second-quarter operating income. The resilient company managed its supply chain and cost structure to weather the storm of the global public health and economic crises.
The LG Home Appliance & Air Solution Company reported revenues of KRW 5.16 trillion (USD 4.22 billion) in the second quarter, down 15.5 percent from the second quarter of 2019, due to the effect of softer global demand during the pandemic. Operating income of KRW 628 billion (USD 514.23 million) declined 12.5 percent year-on-year even though operating profit margin of 12.2 percent was the highest second quarter in the history of the LG H&A Company. Looking ahead, the LG H&A Company is buoyed by increasing consumer interest in healthier living.
The LG Home Entertainment Company’s second-quarter revenues and profitability were impacted by lockdown measures including closures of retail stores. Sales were KRW 2.26 trillion (USD 1.85 billion), a decline of 24.4 percent from the second quarter of 2019, and operating income of KRW 112.8 billion (USD 92.37 million) was 25.9 percent lower. In addition to continuing to reduce material costs, the LG HE Company is aggressively controlling marketing investments, increasing the proportion of premium TV products, expanding online sales and further optimizing operating efficiencies to bring profitability in line with last year.
The LG Mobile Communications Company posted second-quarter sales of KRW 1.31 trillion (USD 1.07 billion), a 31.1 percent increase from the first quarter. The significant improvement is due in part to the beginning of markets opening after lockdown. The operating loss of KRW 206.5 billion (USD 169.10 million) narrowed compared to both the second quarter of 2019 and the first quarter of 2020 as a result of improved marketing efficiencies and greater cost controls. The global rollout of LG VELVET in the third quarter along with the launch of new attractively-priced models are expected to create momentum for LG branded smartphones, growing both sales and profitability.
The LG Vehicle Component Solutions Company recorded quarterly revenues of KRW 912.2 billion (USD 746.95 million), a 40 percent decline from the same quarter last year, and an operating loss of KRW 202.5 billion (USD 165.82 million) as a result of pandemic-related manufacturing shutdowns of global automakers. Demand for auto parts is expected to gradually recover as major automakers resume operations.
The LG Business Solutions Company reported sales of KRW 1.31 trillion (USD 1.07 billion) in the second quarter, 12.6 percent lower than the same quarter last year, while operating income declined to KRW 98.30 billion (USD 80.49 million). To help tackle the ongoing challenges, LG’s B2B division is focused on creating business opportunities in the growing “untact” trend, with a focus on expanding sales of premium digital signage products, strengthening its competitiveness in solar modules and capturing a greater share of the telecommuting and distance-learning markets.
2020 2Q Exchange Rates Explained
LG Electronics’ unaudited quarterly earnings results are based on IFRS (International Financial Reporting Standards) for the three-month period ending June 30, 2020. Amounts in Korean won (KRW) are translated into U.S. dollars (USD) at the average rate of the three-month period of the corresponding quarter — KRW 1,221.24 per USD.
Earnings Conference and Conference Call
LG Electronics will hold a Korean / English conference call on July 30, 2020 at 16:00 Korea Standard Time (07:00 GMT/UTC). Participants for the conference call are instructed to call +82 31 8103130 and enter the passcode 6418#. Visit http://pin.teletogether.com/eng and pre-register with the passcode provided. The corresponding presentation file will be available for download at the LG Electronics website (https://www.lg.com/global/investor-relations-reports) before the call.