(Adds comments from executives, fund manager, forex impact,
* Q4 operating profit 238 bln won vs 223 bln won analyst
* TV division profit jumps to 174 bln won from 800 mln won
* Mobile unit swings to 43 bln won loss from 56 bln profit
* Smartphones sales reach 13.2 mln, up 54 pct on year
* Targets 7 pct revenue increase in 2014
By Miyoung Kim
SEOUL, Jan 27 South Korea's LG Electronics Inc
beat analyst estimates by doubling quarterly profit
thanks to year-end holiday spending on high-end TVs, brushing
off a loss in its smartphone business.
The world's second-biggest TV maker after Samsung
Electronics Co Ltd has been promoting its most
profitable sets in advanced economies where consumers are more
willing to pay higher prices, but where sales growth has
The manufacturer has also spent heavily marketing high-end
smartphones in its quest to catch up with leaders Samsung and
Apple Inc, which in the fourth quarter was at the
expense of profitability.
LG, which also makes microwaves and vacuum cleaners, hopes
the spending will lead to overall revenue of 62.3 trillion won
($57.67 billion) this year, 7 percent more than last year.
That would come after October-December operating profit
reached 238 billion won, LG said in a statement on Monday,
beating the 223 billion won estimate of 35 analysts polled by
Thomson Reuters I/B/E/S.
The figure also compared with the 218 billion won of
July-September and 117 billion won of a year earlier, when
marketing and supply chain management problems affected profit
at its TV unit.
"Even as the global TV market shrank in the last quarter, we
were able to achieve higher profit thanks to increased sales of
high-end models in North America and Europe," Chief Financial
Officer Jung Do-hyun said at an earnings briefing.
"We plan to boost profit further this year by expanding
premium line-ups, but risks remain due largely to growing
volatility in emerging-market currencies, which was one of the
major factors hitting our bottom line last year."
Shares of LG closed down 1.3 percent on Monday compared with
a 1.6 percent decline in the benchmark index.
The stock has lost 6 percent over the past six months
whereas the benchmark has gained 1.5 percent.
LG, which last year launched TVs with curved next-generation
technology displays, said operating profit at its TV business
reached 174 billion won from just 800 million won a year prior.
LG is hoping a shift toward premium models will help it cope
with a slowdown in global TV sales, and increase its
competitiveness against Japanese rival Sony Corp whose
products were made cheaper in some economies by a weak yen.
"We think a greater focus on high-end line-ups such as
curved TVs and ultra high-definition will help differentiate our
products from rivals and win back market share," said Ha Jin-ho,
vice president at the TV business.
TVs generated 40 percent of revenue in the fourth quarter.
Mobile devices accounted for 24 percent and home appliances 19
percent. The remainder came from its air conditioning unit and
The home appliance business, which makes the bulk of its
refrigerators and washing machines in Korea, suffered a fall in
earnings last year as a stronger won made domestic production
more expensive and reduced the value of repatriated revenue.
The won gained 3 percent against the U.S. dollar and 27
percent versus the yen in the fourth quarter alone.
Foreign exchange movement resulted in LG reporting an
overall net loss of 63 billion won in October-December rather
than analysts' forecast profit of 149 billion won.
RECORD MARKETING SPEND
LG, whose G2 and G Pro smartphones challenge Samsung's
Galaxy line and Apple's iPhones, shipped a record 13.2 million
smartphones in the fourth quarter, up 54 percent on year.
Even so, its mobile business swung to an operating loss of
43 billion won from profit of 56 billion won.
"We substantially increased mobile marketing in the third
and fourth quarter and the amount hit a record level last
quarter. We'll continue to invest heavily on marketing, as we
don't think it will take just one year to strengthen our brand
equity," Yoon Bu-hyun, vice president of the mobile business,
said at the briefing.
CFO Jung said he expects the marketing investment to show
results from the second half of this year.
Next month, LG plans to release the latest version of its
high-end G Pro large-screen smartphone, a segment where
competition is set to peak if Apple enters later this year, as
"It will be difficult for LG to improve its phone business
this year" if Apple does release a big-screen phone, said HI
Asset Management fund manger Hwang Jae-yeon, who recently
reduced its holding of LG shares.
LG also has to contend with growing low- and mid-end phone
markets, where LG has fewer products than Samsung, said Hwang.
"LG's phone competitiveness has improved significantly, but
this has come too late."
($1 = 1080.3500 Korean won)
(Additional reporting by Hyunjoo Jin; Editing by Christopher