UPDATE 1-LG Elec swings to Q2 profit on LCD venture, phones

(Adds details, shares)

SEOUL, July 19 (Reuters) - South Korea's LG Electronics Inc. (066570.KS) swung to a profit in the second quarter as a turnaround in its LCD venture and strong mobile phone sales outweighed heavy losses in its plasma display business.

LG, the world's No. 5 handset maker, is likely to enjoy a stronger second half as a recovery at its liquid crystal display

(LCD) joint venture, LG.Philips LCD Co. Ltd. (034220.KS), is set to continue.

But analysts warned margins in mobile phones could fall on growing low-cost phone sales, and said a recovery from its loss-making plasma screen business would be limited.

LG, which competes with local rival Samsung Electronics Co. Ltd. (005930.KS) in handsets, TVs and appliances, on Thursday posted a net profit of 384.6 billion won ($420.1 million) in the quarter ended June, well above a 215 billion won profit forecast from analysts polled by Reuters.

The result marks a sharp improvement from a loss of 9.7 billion a year earlier and a 122.6 billion shortfall in the previous quarter.

Revenue came at 5.90 trillion won, compared with 5.8 trillion a year earlier.

LG, the world's second-biggest maker of plasma display panels, is suffering from a glut of flat screens and increasing popularity of rival LCD screens in the large-TV market. To save costs, the company shut down its oldest plasma panel line during the last quarter.

Its display division's operating loss margin deepened to 24.2 percent on a parent basis, compared with a 16 percent loss in the first quarter.

LG sold 19.1 million phones in the second quarter, up from 15.8 million in the first, with its parent-basis mobile phone profit margin rising to 11.3 percent from 6.6 percent in January-March.

The company, which trails Nokia (NOK1V.HE), Motorola Inc. (MOT.N), Samsung and Sony Ericsson (6758.T) (ERICb.ST) in the handset market, was helped by its high-end phones, including the hit "Chocolate" slider model and metal-encased "Shine."

Shares in LG, which has a market value of nearly $12 billion, rose 1.52 percent to 73,700 won by 0527 GMT, compared with the wider market's 0.29 percent loss.

The stock climbed 19 percent in the second quarter, in line with the KOSPI's 20 percent gain.

($1=915.4 Won)