LG Electronics was yet another company which reported its earnings this week. It reported a 46% increase in its net profits year-over-year. Net profits increased to $138 million but revenues declined to $11.16 billion, down 10.6% year-over-year primarily because of declining phone sales.
LG posted a total operating profit of around $303 million, most of which came from its home entertainment division — around $187.5 million. Though division sales declined to $4.76 billion, down 5.8% year over year, margins increased due to improved supply chain management. Continued sales of LG’s Cinema 3D TVs made it the global leader in the 3D TV segment.
LG’s mobile division, on the other hand, posted a loss of around $50 million, with revenues declining 28.5% to $2 billion. The loss was primarily due to increased marketing expenses following the launch of new models. Smartphones now account for 44% of unit sales, and will only increase going forward.
LG’s home appliance division posted an operating profit of around $143 million, nearly triple last year’s profit due to a better product mix and improved cost efficiencies. Developing market growth also pushed revenues up to $2.5 billion.
Its AC and energy solutions division posted an operating profit of $61 million, up 17% over last year, with revenues declining to $1.28 billion.
Despite declining revenues, LG has been able to prop up its operating margins by focusing on profitability rather than sales.
What we are most concerned about is LG’s mobile division, which has been hammered not only by the iPhone, but also by Android devices from Samsung, HTC, Motorola, and others. Hopefully, it will make a comeback in the coming quarters.