LG Electronics tips January-March profit to be best quarter in nearly two years

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People walk past a LG Electronics logo during the Mobile World Congress in Barcelona, Spain February 25, 2016. REUTERS/Albert Gea
People walk past a LG Electronics logo during the Mobile World Congress in Barcelona, Spain February 25, 2016.

Reuters/Albert Gea

South Korea’s LG Electronics Inc said its first-quarter operating profit likely rose 66 percent, pointing to its best quarter in nearly two years with earnings apparently lifted by healthy appliance sales and falling television panel prices.

The world’s No. 2 television maker said in a regulatory filing on Monday that it expects a first-quarter profit of 505 billion won ($441 million), its best since the second quarter of 2014. That would be well above an average forecast of 408 billion won from a Thomson Reuters I/B/E/S survey of 25 analysts, and better than any individual forecast in the survey.

The guidance – the first time the company has given an official earnings estimate prior to full publication – is a sign of recovery at LG Electronics. The firm’s 2015 profit plunged 35 percent as its TV and mobile businesses struggled.

LG Electronics will disclose detailed earnings in late April and provided no further clues on quarterly profit. But the firm estimated January-March revenue would be 13.4 trillion won, down 4.5 percent from a year earlier, pointing to lower operating costs.

Analysts had said ahead of the firm’s disclosure that healthy sales for its appliances business likely boosted earnings. Declining prices for panels and growth in sales of high-end products such as organic light-emitting diode televisions were seen lifting earnings.

The South Korean won’s weakness was also expected to help exports. The local currency’s average exchange rate fell 8.4 percent against the dollar during the January-March quarter.

But the company’s mobile communications division is expected to have reported its third straight quarterly loss, however, as the firm ramps up marketing spending to promote the flagship G5 smartphone that it launched in late March.

Should LG Electronics be able to convert the G5 launch into a success story, analysts would expect a further profit boost.

“If the MC (mobile) division can turn a profit in the second quarter, we’ll see a record quarterly operating profit of more than 600 billion won,” said Dongbu Securities analyst S.R. Kwon.

This was the first time LG Electronics has disclosed official quarterly earnings guidance prior to full publication.

(Reporting by Se Young Lee; Editing by Kenneth Maxwell)