LG Sees Lower Profit as Mobile Business Stays in the Red

LG Electronics Inc's operating profit likely fell by a smaller-than-expected 19 percent in the first quarter, even as losses in its mobile business and rising competition in the television segment pushed its revenue down to below consensus.

Shares of the South Korean firm trimmed earlier gains after the news and turned down as much as 1.5 percent on Friday, in a broader market that was up 1.2 percent.

The second-biggest TV set maker in the world, after Samsung Electronics, estimated an operating profit of KRW 899.6 billion ($792.77 million) for the January-March period, versus KRW 1.1 trillion a year earlier.

That compares with an average estimate of KRW 808 billion from 21 analysts polled by Refinitiv I/B/E/S.

Revenue likely fell 1.4 percent to KRW 14.9 trillion, the South Korean firm said, below a KRW 15.3 trillion consensus.

LG did not disclose further details of first-quarter operations and will announce full results in late April.

Analysts said LG's longtime loss-generating smartphone business, in the red for seven quarters, and intensifying price competition in the global TV market likely weighed on earnings.

"LG's competitor Samsung recently cut prices for its TV products in a bid to get ahead as Chinese television makers have been rapidly catching up," said Park Sung-soon, an analyst at BNK Securities.

Analysts also have a dim view of LG's smartphone business and expect it to continue generating losses.

LG held a 3 percent share of the global smartphone market in terms of shipment last year, according to a report from market tracker Counterpoint Research. The company plans to release its 5G-enabled smartphone in South Korea later this month.

Mobile carriers in the country, which has one of the world's highest smartphone penetration rates, rolled out the latest wireless technology this week on Samsung's new 5G-enabled handset Galaxy S10.

Samsung flagged earlier on Friday that it was heading for its lowest quarterly profit in more than two years as a glut in memory chips, slowing panel sales and rising competition in smartphones hit margins.

© Thomson Reuters 2019