LG Electronics Inc, the world's No.2 TV maker, said quarterly profit fell 13 percent as sharp price cuts resulted in razor-thin margins for its TV division, overshadowing a strong recovery in smartphones.
An employee works at a store of LG Electronics in Seoul. Credit: Reuters/Lee Jae-Won
Since late last year, LG and bigger rival Samsung Electronics Co have had to
contend with unfavourable currency rates that benefit Japanese rivals, while global demand for TVs is expected to plateau this year as many consumers in developed countries already own a flat-screen TV.
Smartphones sales jumped to a record 10.3 million units, helped by new high-end models. LG has overtaken Taiwan's HTC Corp to become the world's No.3 smartphone maker by sales in the fourth quarter, although its 3.2 percent market share is still dwarfed by Apple Inc and Samsung.
LG said January-March operating profit fell to 349 billion won, above a consensus forecast for 289 billion won from 35 analysts surveyed by Thomson Reuters I/B/E/S.
That compares with 402 billion won a year ago and 117 billion won in the previous quarter. It marks its first profit decline in year-on-year terms in five quarters after 2011 and 2012 results were revised to reflect accounting changes.
While its TV troubles may not match the dire straits faced by Japanese rivals Sony Corp and Panasonic Corp, both of which are downsizing their television businesses, LG's profit margins have slipped to below 1 percent since the third quarter, compared with nearly 6 percent in the second quarter of last year. TV profits for LG tumbled 82 percent to 29.8 billion won.
Its mobile business' profit improved to 133 billion won from a 31 billion won profit a year ago and 56 billion won in the fourth quarter.
But that recovery, which has helped propel its share price 18 percent higher in the last three months, could slow again. Samsung introduces the latest version of its flagship Galaxy S this week and Apple is widely expected to launch a cheaper iPhone this year.
Its shares fell 0.4 percent after the results, compared to a 0.8 percent decline for the broader market.