LG Electronics received a performance report that fell significantly short of the securities industry forecast in the fourth quarter of last year. With intensified competition from Chinese TV and appliance corporations, along with significant increases in logistics expenses and marketing expenses, the operating profit recorded was 146.1 billion won, far below the initially anticipated operating profit estimate of 397 billion won. Considering that the operating profit of its subsidiary, LG Innotek, is estimated to be in the 300 billion won range, it is essentially in a loss situation.
On the 8th, LG Electronics announced that it recorded a preliminary operating profit of 146.1 billion won for the fourth quarter of last year. During the same period, sales amounted to 22.7775 trillion won. Sales increased by 0.2% compared to the previous year, but operating profit dropped by 53.3%. Earlier, the securities industry had revised the operating profit forecast down from the 400 billion won range to the 300 billion won range, and recently to 250 billion won, but the actual results did not meet even these lower expectations.
LG Electronics noted, "In particular, unexpected global freight rate surges and one-time expenses related to inventory normalization considering the uncertainties in the business environment arose in the second half of last year, and this somewhat affected profitability," adding that "in terms of annual corporate management results, qualitative growth continues due to the restructuring of the business portfolio, which is positive."
Analysis shows that the fourth quarter of last year continued a trend of poor performance in most business sectors, including TV, home appliances, B2B, and automotive. In the TV sector, profitability deteriorated due to intensified competition from Chinese corporations and increased marketing expenses. Additionally, rising investment expenses in the Business Solutions division pursuing new business initiatives also contributed to the decline in profitability.
Logistics expenses seem to have hindered LG Electronics in the fourth quarter, following the third quarter. The Shanghai Container Freight Index (SCFI), which indicates the level of sea logistics costs, has been rising continuously since November last year. LG Electronics explained in official materials that "unexpected global freight rate surges and one-time expenses related to inventory normalization considering the uncertainties in the business environment arose in the second half of last year, somewhat affecting profitability."
LG Electronics estimated that its core business and cash cow, home appliances, exceeded 30 trillion won in sales for two consecutive years last year. However, in the home appliance sector, competition from Chinese corporations is intensifying in major markets including the U.S., China, and India, and stagnation in growth within the premium market is also cited as a reason for the decline in operating profit.
LG Electronics emphasized that "while the operating profit has been under challenging circumstances, it has maintained stable profitability on an annual basis," adding that "in terms of annual corporate management results, qualitative growth continues due to the restructuring of the business portfolio, which is positive." In terms of actual sales figures alone, LG Electronics set a new record for maximum sales last year, with an average annual growth rate (CAGR) exceeding 10% over four years.
This year, LG Electronics aims to focus on qualitative growth based on innovation in its business portfolio. In home appliances, it will expand its AI and Volume Zone lineup, diversify its business methods to cater to customer demand through subscriptions and direct-to-consumer (D2C) sales, and strengthen its premium lineup in the recovering European high-end market within the TV sector.
The automotive business is somewhat affected by the electric vehicle demand lull, but it is expected to exceed annual sales of 10 trillion won for the second consecutive year. LG Electronics stated, "In our core products, including in-vehicle infotainment (telematics, audio, video, navigation, etc.), we are solidifying our market position and continuing stable growth," adding that "this year, with a focus on preparing for the future, we will concentrate on transitioning to Software Defined Vehicle (SDV) and focus on strengthening our operational profitability to solidify our foundation."