LG Elec Q2 profit misses forecast on costs; stocks tumble

LG Electronics Inc., the world’s leading home appliance maker, missed quarterly profit projections due to one-time costs related to job cuts, sending its share price to a five-week low, although the performance of its automotive business has offset concerns over the company's outlook.

The South Korean tech giant said on Friday its preliminary operating profit rose 12.7% to 892.7 billion won ($684.1 million) in the second quarter from a year earlier with sales up 2.7% to 20 trillion won. The profit was below analysts’ average estimate of 977.9 billion won.

“The profit fell short of the forecast as it reflected non-recurring costs related to the employee structure,” said a company official, adding that a profit calculation excluding these expenses would have topped the estimate.

After the disappointing profit results, LG Electronics’ shares closed down 1.8% at 123,000 won in Seoul’s main stock market, underperforming a 1.2% loss of the wider Kospi. The stock lost as much as 3.2% to hit 121,300 won earlier in the day, its lowest point since June 1.

The company is scheduled to unveil detailed earnings for the quarter later this month.

AUTOMOTIVE ELECTRONICS BUSINESS

LG Electronics said its automotive electronics business, which includes the in-vehicle infotainment, electric vehicle powertrain and car lighting segments, continued to enjoy strong growth on high order backlogs and stable supply chain management.

Its vehicle component solutions (VS) division’s order backlogs surged 45.5% to 80 trillion won as of end-March from 50 trillion won in 2020 as automobiles were equipped with more electronics parts and the rapid growth of the global EV market. The division reported its first profit during the second quarter of 2022 in nearly seven years.

The automotive electronics business, which LG Electronics has been developing as a future growth engine, was expected to maintain strong growth momentum in the second half, given healthy growth in the global EV sector, industry sources said.

LG Magna e-Powertrain Co., a joint venture with Canadian car parts maker Magna International Inc., was predicted to turn to the black in the fourth quarter and report annual growth of 50% by 2025, according to the sources.

Meanwhile, LG Electronics said its home appliance business logged “strong profitability” on higher sales of air conditioners, heat pump-enabled products and energy storage systems despite an economic downturn, which analysts said hurt its TV sales.

Write to Ye-Rin Choi at rambutan@hankyung.com
 

Jongwoo Cheon edited this article.