LG has reported record revenues and operating profits in the fourth quarter of 2009, reflecting the results of the company’s successful strategy and competitiveness during the current recession. Results for full year 2009 also showed strong revenue growth and record operating profits versus the previous year.
Sales and Profit
Record sales and operating profits were reported for the three months ending Dec. 31, 2009. Sales on a global basis (including LG’s overseas subsidiaries) rose 6.8 percent to KRW 14.3 trillion (USD 12.2 billion) year-over-year.
Operating profit was up to KRW 446.7 billion (USD 382 million) resulting in a margin of 3.1 percent, 2.3 percent points higher than the fourth quarter last year.
2009 annual sales on a global basis soared 12.5 percent to a company record-high level of KRW 55.5 trillion (USD 43.4 billion) with operating profit recording KRW 2.9 trillion (USD 2.3 billion).
Consolidated sales including subsidiaries rose 15.3 percent year-over-year to KRW 73.0 trillion (USD 57.1 billion). Consolidated operating profit reached KRW 4.2 trillion (USD 3.3 billion), for a margin of 5.8 percent.
The LG Home Entertainment Company saw fourth quarter sales rise by 18 percent to KRW 5.9 trillion (USD 5.0 billion), returning an operating profit of KRW 271.6 billion (USD 232 million) for a margin of 4.6 percent, 5.2 percent points higher than the previous year, as a result of strong product leadership and rising demand for LCD TVs and Plasma TVs.
Unit sales of total flat panel TVs jumped 52 percent year-over-year to 6.6 million sets from 4.3 million. Quarter-over-quarter unit growth was also seen in both LCD TVs and Plasma TVs, 38 percent and 29 percent respectively.
Annual sales reached KRW 19.6 trillion (USD 15.3 billion), jumping 19.9 percent from the previous year, mainly led by record unit sales of 19.5 million flat panel TVs. On the whole, profitability increased due to higher sales and more aggressive cost management.
The LG Mobile Communications Company reported sales of KRW 4.2 trillion (USD 3.6 billion) in sales, 7.4 percent lower than the 2009 fourth quarter. Operating profit of KRW 55.8 billion (USD 48 million) in the 2009 period resulted in a margin of 1.3 percent.
Handset revenues were KRW 3.9 trillion (USD 3.3 billion), a 5 percent decline from the same quarter in 2008, while operating profit reached KRW 66.5 billion (USD 57 million), resulting in a margin of 1.7 percent.
Unit shipments of handsets saw an increase of 32 percent year-over-year and 7 percent quarter-over-quarter to 33.9 million units, which resulted in a record 117.9 million units being sold in 2009 versus 100.7 million units in 2008 due to robust growth in North America, Europe and emerging markets.
Price erosion and an increase in marketing expenses for year-end inventory clearance and emerging market channel expansion resulted in lower profitability compared to the third quarter.
Yearly sales for the Mobile Communications Company increased 13.5 percent to KRW 18.2 trillion (USD 14.2 billion), with the handset division alone seeing an increase of 17.3 percent year-over-year to KRW 17.1 trillion (USD 13.4 billion).
The LG Home Appliance Company posted a sales increase of 6.8 percent to KRW 2.5 trillion (USD 2.1 billion) on a KRW base in the fourth quarter, compared with the same period last year.
Recovery of demand in emerging markets contributed to this growth year-over-year. The company’s product competitiveness resulted in an operating profit of KRW 75.7 billion (USD 65 million), resulting in a margin of 3.1 percent.
Despite low demand by seasonality, greater sales in emerging markets and ongoing cost reduction generated a higher margin year-over-year. Total sales for full year 2009 rose 10.9 percent over 2008 to KRW 9.5 trillion (USD 7.4 billion).
The LG Air Conditioning Company recorded a 9.4 percent decline in fourth quarter revenues on a KRW base (3 percent rise on a USD base) to KRW 619.9 billion (USD 530 million) year-over-year.
Full-year sales reached KRW 4.5 trillion (USD 3.5 billion), 1.4 percent lower than a year earlier. Highly efficient commercial air conditioning products led the growth in Korea. Despite the recession, the company sees market demand and sales increasing in emerging markets.
The LG Business Solutions Company announced a 10.8 percent rise in year-over-year fourth quarter sales to KRW 1.3 trillion (USD 1.1 billion) with an operating profit of KRW 57.6 billion (USD 49 million).
Annual sales posted KRW 4.6 trillion (USD 3.6 billion), essentially flat with 2008, with revenue rising as market demand in Europe expanded. Higher sales in monitor TVs and partnerships with hotels and major customers contributed to greater profitability.
2010 1Q Business Direction and Prospects
Market demand is expected to rise as the global economy begins to emerge from the recession. On a global basis, LG Electronics expects sales growth -- especially from LCD TVs on a USD base -- as a result of conversion to digital TV in developed markets and increased demand due to World Cup soccer and Olympic Games in 2010.
LG’s mobile communications business is targeting a 19 percent increase in unit sales to 140 million, focusing on the exploding smartphone category and differentiation in content and services. Solar-cell, LED lighting and new solutions businesses in automotive and commercial areas represent new business engines expected to increase revenues.
LG’s profitability is expected to improve year-over-year, driven by premium products in home entertainment and home appliances. The Company earlier announced a goal of KRW 59 trillion (USD 51.3 billion) in sales and KRW 3.6 trillion (USD 3.1 billion) earmarked for new investments in 2010.