LG Electronics expects auto parts business to turn profitable in H2

South Korea’s LG Electronics Inc. said on Thursday it expects its loss-making auto parts business to turn to profit in the second half of this year at the earliest, after posting record overall sales and operating profit in the first quarter.

The Korean home appliance giant said in a regulatory filing on Apr. 29 that it logged a net profit of 1.17 trillion won ($1.05 billion) in the January-March quarter, up from 1.08 trillion won a year ago.

On a consolidated basis, its operating profit spiked 39.1% on year to 1.51 trillion won, while sales jumped 27.7% to 18.8 trillion won. Both the operating profit and revenue mark the company’s best-ever quarterly results.

LG's record-setting performance was anchored by its home appliance and air solution division that posted 6.7 trillion won in revenue, up 23.8% from a year ago, and 919.9 billion won in operating profit, up 22.1% from a year earlier.

"The appliance business division saw significant growth in North America and Europe as well as in its home market, where the rental business was particularly healthy," LG said.

EYE-CATCHING AUTO PARTS BUSINESS

One eye-catching business area in the first quarter is the company’s vehicle component solutions (VS) division that reported 1.89 trillion won in sales, up 43.5% from a year earlier. That’s the steepest on-year increase among LG’s various business divisions.

The auto parts division posted an operating loss of 700 million won, significantly narrowed from a shortfall of 96.8 billion won in the year-earlier period.

LG said a supply crunch in the automotive chip sector is expected to continue for some time and the company could also experience difficulties in the second quarter.

However, LG said it is confident that the vehicle component business will make a turnaround in the second half of the year.

LG, a unit of South Korea’s fourth-largest conglomerate, said in December 2020 it is joining hands with Canadian auto parts maker Magna International Inc. to form a $1 billion joint venture to build electric car components to tap into the growing global demand for electric vehicles.

The JV, tentatively named LG Magna e-Powertrain Co., will launch on July 1 as scheduled, LG said.

SMARTPHONE BUSINESS IN THE RED

LG's mobile communications (MC) unit, which has been in the red since the second quarter of 2015, continued its slump.

Its sales stayed nearly flat at 998.7 billion won, but operating loss widened to 280.1 billion won from 237.8 billion won a year earlier.

Earlier this month, LG announced its exit from the mobile phone business, which has accumulated operating losses of 5 trillion won, putting its focus on automotive parts and robotics as well as its flagship home appliance business.

The withdrawal from the smartphone market is expected to improve LG's bottom line from the current quarter, pushing the company’s 2021 operating profit to a new record in the 4 trillion won range, analysts said.

Write to Su-Bin Lee at lsb@hankyung.com
In-Soo Nam edited this article.