LG Electronics Inc posted a smaller-than-expected 25 percent fall in first-quarter operating profit on Tuesday and said it expected improving sales of mobile phones and air conditioners to drive a recovery in the quarters ahead.
LG <066570.KS>, the world's No. 3 mobile phone maker, said its handset margins held up well in the three months ended March, while sales of flatscreen LCD TVs jumped by more than a third from a year ago.
The results are much better than expected, and its strong line-up in cellphones, home appliances and TVs appears to have helped it gain market share against rivals and outperform in a tough global economic environment, said Chung Sung-Ho, an analyst at KB Investment & Securities.
A weaker won has also helped it boost sales and LG is likely to continue to perform well this year.
LG said it expected to increase total sales by more than 10 percent in the second quarter from the first, boosted by strong revenues from air conditioners. LG is the world's biggest maker of home-use air conditioners.
LG also said it aimed to increase mobile phone sales by more than 10 percent in the second quarter from the first.
We think the second quarter could yield better results than the first, Chief Financial Officer Jung Do-hyun told an investor meeting, before adding a note of caution.
Considering economic indicators, it's unlikely that the economy would recover sharply. (The downturn) could drag on as long as two years, or as short as one year.
PHONE MARGINS RESILIENT
LG, which trails Nokia
It posted a 6.7 percent operating profit margin in handsets, an improvement from 5.2 percent posted in the fourth quarter. Analysts expect Samsung to post a similar margin on cellphones when it reports on Friday, while Nokia's handset margin was 10.4 percent in its most recent quarter.
Last week, Nokia reported a 27 percent fall in January-March sales and its first-ever quarterly pretax loss while repeating its forecast for market volumes to decline around 10 percent in 2009.
Fourth-ranked Sony Ericsson <6758.T>
LG's global-basis operating profit was 455.6 billion won ($337.1 million) for the quarter to March 31, beating a 307.4 billion won average profit forecast from nine analysts polled by Reuters.
That was down 25 percent from a 605.2 billion won profit a year earlier but up from a 101.4 billion won profit in the fourth quarter last year.
LG's first-quarter net loss of 197.6 billion won was also narrower than a 671.3 billion won net loss in the previous quarter when it was hit by sharp losses at its flat-screen joint venture, LG Display Co Ltd <034220.KS>.
Its global-basis sales were 12.85 trillion won, in line with forecasts.
In popular liquid crystal display (LCD) TVs, LG competes with home rival Samsung and Japan's Sony <6758.T>. Its LCD TV sales in the first quarter rose 36 percent from a year ago.
LG Electronics shares rose 1 percent in the flat wider market <.KS11>. The stock has risen 40 percent so far this year through Monday's close, more than double the broader market's 19 percent gain.
(Editing by Lincoln Feast)