LG Electronics said this week it’s expecting to report a strong second quarter performance, thanks in part to the continued success of its Home Entertainment business and the growing popularity of OLED TVs.
The South Korean firm said it saw “robust demand” for its products in the second quarter, and in its earnings guidance projected an operating profit of 1.1 trillion won (around £702.3 million), up 65% from a year ago.
That projection came in lower than the analyst estimate of 1.2 trillion won in operating profit, suggesting that the company could have performed even better. However, it still represents a record-breaking second quarter performance.
The company also projected overall second quarter revenue of 17.1 trillion won, below the analyst consensus of 17.6 trillion won, but again still another quarterly record for the company.
LG’s second quarter profit and sales estimates were however down by 37% and 3.9%, respectively, compared to the first quarter, when it posted the largest quarterly earnings in its history.
LG didn’t provide a breakdown of the performance of its respective business divisions, and will only do so when it reports more detailed earnings at the end of the month. However, analysts said LG’s home entertainment unit, which manages its consumer TV business, is believed to have performed strongly with expected operating profit of between 250 billion and 300 billion won, with around 4 trillion won in total sales.
The home entertainment unit has benefited from strong sales of OLED TVs this year as the display technology becomes more affordable and sought-after by consumers. OLED TVs have traditionally been very expensive, but in recent years the technology has become more affordable to manufacture. In addition, LG last year introduced smaller 48-inch OLED TVs that further bring down costs for end buyers.
LG’s strong presence in the OLED TV market has also helped protect it from surging prices of Liquid Crystal Displays. Over the last year LCD display panel prices have risen sharply due to supply chain issues and shortages caused by the COVID-19 pandemic. The LCD display typically makes up around 40% of the overall cost of making TV, and thus, the price increases have chipped away at many TV maker’s profits. But LG’s shift to OLED has helped to protect its home entertainment business, analysts said.
Moreover, Cha Yu-mi of Mirae Asset Securities told Korea Bizwire he believes increased LCD prices could benefit LG because it “narrows the price gap between LCD and OLED prices, meaning it could increase the market penetration of OLED TVs.”
LG also reportedly benefited from a big jump in sales in its home appliance business, reports said.
For the second half of the year analysts have forecast a rosy outlook for LG, even if demand from the stay-at-home economy slows. That’s because the company remains laser-focused on high-end products and on boosting its presence in additional markets.
“With its efforts to beef up its market share in Europe and its position in the premium products, LG is likely to maintain its growth momentum,” said Kim Ji-san, a researcher at Kiwoom Securities.
