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UPDATE 2-LG Elec posts Q1 profit as handset loss narrows
April 27, 2011 / 4:34 AM / 7 years ago

UPDATE 2-LG Elec posts Q1 profit as handset loss narrows

* Q1 operating profit 131 bln won vs 149 bln won consensus

* Q1 handset operating loss narrows to 101 bln won

* Home appliance remains most profitable, margins dip to 3.8pct

* Profits to recover gradually from Q2 - analysts

* LG shares up 1.4 pct vs 0.3 pct rise in KOSPI (Adds comments)

By Miyoung Kim

SEOUL, April 27 (Reuters) - LG Electronics Inc posted its first profit in three quarters and the world’s No.3 handset maker said it saw better earnings ahead as it halted slipping margins in the competitive mobile phone market.

LG’s phone division is expected to swing to a profit in the current quarter, boosted by new products such as Optimus 2X and Optimus Black in the high-end segment.

It still faces an uphill battle against heavyweights such as Apple Inc , which overtook Nokia last quarter as the world’s biggest handset maker by revenue on strong iPhone shipments.

“I expect LG’s handset division to turn around in the second quarter, as LG is expanding its smartphone line-up to the high-end, improving product mix ,” said Soh Hyun-cheol, an analyst at Shinhan Investment Corp.

“Along with the seasonality of home appliances such as air conditioners, LG Electronics is expected to achieve more than 300 billion won in operating profit even from a conservative point of view.”

LG, also the world’s No.2 TV maker, reported a January-March operating profit of 131 billion won ($121 million), missing consensus forecast of a 149 billion won profit by Thomson Reuters I/B/E/S.

Its profit fell to less than a third of the 481 billion won posted a year ago as the South Korean firm was hit by weak television sales and its handset business stayed in the red due to a lack of new smartphones. However, it made an improvement from a record 246 billion won loss in the previous quarter.

LG’s beaten down shares rose 1 percent by 0541 GMT versus a 0.3 percent rise in the wider market.

Shares of the company, which trails Nokia and Samsung Electronics in handsets and competes with Sony Corp and Panasonic Corp in flat-screen TVs, have fallen 10 percent so far this year, lagging the wider market , which has risen 8 percent to life-time highs.


Operating losses from handset sales narrowed to 101 billion won from a 262 billion won loss in the fourth quarter and its TV division swung to a profit of 82 billion won from the fourth-quarter’s 65 billion won loss.

LG is betting on its two premium models of Optimus Black and Optimus 2X, which uses powerful dual core processor to improve gaming and browsing speed, to help the firm pull out of the loss but it is facing stiff competition.

Samsung unveils a new version of its flagship Galaxy S this week and Apple is making record iPhone sales with 18.65 million shipments in the last quarter.

“They (LG) are still behind Samsung Electronics and Apple, but compared to its previous smartphone lineups, latest premium lineups appear to have more competitive edges,” said S.R. Kwon, an analyst at Dongbu Securities.

LG, one of the world’s leading home appliances makers, saw profit from the division halved to 103 billion won, as a stronger won and rising raw material costs more than offset a 13 percent rise in sales.

The division’s profit margin more than halved to 3.8 percent, although it was still the most profitable among LG’s five major businesses. (Additional reporting by Hyunjoo Jin and Jungyoun Park; Editing by Jonathan Hopfner and Vinu Pilakkott)

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