LG Electronics is envisioning a rosy future despite the home appliance recession caused by the global economic slowdown and wars in Europe and the Middle East. The rapid growth of the existing main business, home appliances, and the high growth of the electronics business, which has been selected as a future food source, are serving as a support to withstand the global windstorm.
This year’s third quarter performance supports this. The H&A (Home Appliances) Business Division and VS (Electronics) Business Division led the operating profit of KRW 504.5 billion and KRW 134.9 billion, respectively. In terms of sales, they recorded 7.4574 trillion won and 2.5035 trillion won, respectively. This amount accounts for about half of LG Electronics’ company-wide sales of 20.7094 trillion won in the third quarter of this year. In the case of operating profit, it accounts for a whopping 64% of the company-wide operating profit (KRW 996.7 billion).
Despite the economic downturn, home appliances’ operating profit increased by more than 30% compared to the previous year, and electronics achieved its highest quarterly performance in 10 years. LG Electronics, which succeeded in improving its performance from the first to the third quarter of this year, plans to continue its solid trend in the next fourth quarter and focus on achieving record-breaking performance this year.
Operating profit increased by 30% compared to the same period last year and the previous quarter, approaching KRW 1 trillion
On the 27th, LG Electronics announced its consolidated third quarter sales of 20.7094 trillion won and operating profit of 996.7 billion won. Operating profit increased by more than 30% compared to the same period last year and the previous quarter, far exceeding initial market expectations. LG Electronics announced that the expansion of its B2B business, including HVAC (cooling, heating and air conditioning), drove sales growth. This year, the proportion of B2B business in LG Electronics’ sales exceeded the mid-30% range.
The company explained that this was the reason why it was able to record record-breaking sales at a level comparable to the same period last year, which was the highest in the third quarter, despite the continued economic slowdown and decreased demand. B2B is generally less affected by the economy than consumer-oriented businesses, and once it gets on track, stable sales and profits can be expected.
In addition, business model innovation that combines non-HW areas such as content/services and subscriptions with home appliances and TVs, which were previously considered mature businesses, also contributed significantly to high profitability. Previously, it was limited to one-time sales, but now we have succeeded in changing the structure to generate continuous sales and profits by using hundreds of millions of products in use by customers around the world as a platform.
LG Electronics announced that the background for this good performance is ▲B2B growth ▲Non-HW business model ▲securing new business. For example, in the electric vehicle charging business, we are building various partnerships and continuing to invest in order to expand into the global market next year.
Solid home appliances, fast-growing electronics business
By business division, the H&A (Home Appliances) division recorded sales of KRW 7.4574 trillion and operating profit of KRW 504.5 billion in the third quarter. Operating profit more than doubled compared to the same period last year. Despite the expansion of marketing resources ahead of the year-end peak season, the competitiveness of all operations, including production, purchasing, and logistics, led to high profitability.
The VS (Electronics) headquarters recorded sales of 2.5035 trillion won and operating profit of 134.9 billion won in the third quarter. Sales were the highest in the third quarter, and operating profit was the highest in all quarters. LG Electronics expects its electronics business to exceed 10 trillion won in annual sales for the first time this year, and is expected to join the ranks of its main businesses along with home appliances.
Although the proportion of company-wide sales is still low, the pace of growth is gradually accelerating, with sales gradually expanding and a stable profit structure secured based on stable supply chain management. The battlefield order backlog is expected to approach 100 trillion won by the end of the year.
The HE business division, which is in charge of the TV business, recorded sales of 3.5686 trillion won and operating profit of 110.7 billion won in the third quarter. Sales decreased slightly compared to the same period last year, but increased by more than double digits compared to the previous quarter due to increased sales ahead of the year-end peak season. Stable profitability was achieved thanks to efficient marketing resource investment and growth of platform-based content and service businesses.
The BS division, which oversees businesses such as IT and electric vehicle charging, recorded sales of KRW 1.3309 trillion and operating losses of KRW 20.5 billion due to slowing IT demand. An LG Electronics official said in a conference call that day, “Demand for laptops and PCs is at a low point this year and is expected to gradually turn to growth starting at the end of the year.” We plan to continue investing in the electric vehicle charging business, which is being promoted as a new business, without interruption.
Accelerated improvement of business structure
LG Electronics explains that it will focus on expanding sales channels for high-value products as uncertainty is expected to continue in the next fourth quarter and next year due to a delay in demand recovery.
LG Electronics said in a conference call announcing its 3rd quarter performance that day, “The market environment in the 4th quarter is expected to increase demand compared to the previous quarter as the peak season enters,” and “The overall intensity of competition is expected to continue due to the delayed recovery of global demand, but we will focus on distribution and optimization.” “Based on our established collaboration system, we will secure profitability by responding to demand during peak seasons and executing efficient marketing,” he said.
In addition, “We will secure stable and continuous profitability by proactively responding to potential cost increase factors such as international oil prices and logistics costs, operating a business focused on profitability, efficient cost execution, and improving the cost structure,” he said. “Expanding the growth of the B2B business group by region. “We will continue to improve our business structure, including improving our portfolio and growing our non-hardware business,” he added,
adding that he plans to respond with a customized strategy to the fierce pursuit of Chinese home appliance companies. Kim Lee-kwon, managing director of H&A Business Division, said, “In the future, we expect that Chinese home appliances will break away from the low-priced model and actively invest in addition to strengthening the product brand.” He added, “In response to this, we will comprehensively diagnose trends by country and our company’s competitiveness to establish customized strategies for each country and increase resources. “We also plan to readjust our investment priorities메이저놀이터,” he said.
At the same time, he said, “We are in the process of determining the market to focus on by determining the speed of Chinese companies’ catch-up, and comprehensively diagnosing brands, products, price competitiveness, and distribution coverage to clarify long-term and mid- to long-term strategies for each country.” He added, “In the existing home appliance business, “It is difficult to secure profitability due to intensifying competition, but we will be able to maintain the current level of profitability by upgrading our portfolio,” he added.
The VS (Electrical) headquarters plans to achieve rapid growth thanks to the demand for high added value based on electric vehicles. In order to strengthen its competitiveness in receiving orders and secure business opportunities, the VS business division has built an LG Magna e-Powertrain production facility in the Ramos Arizpe region in central Mexico, where major automakers and automobile factories are concentrated. Mass production of motors and inverters began last September.
In the case of the HE business division, the plan is to speed up the transition from the existing TV-centered hardware business to a media platform business that combines content and services. Web OS TV, which is the parameter of the content and service business, will be launched in 2026. We plan to expand to 300 million units.
The BS division plans to drive sales growth by expanding sales of new products and strategic products, actively respond to B2B market demand, and focus on securing profitability through efficient resource investment. In the case of IT, slight growth is expected in the fourth quarter.