LG Innotek's operating profit for the fourth quarter last year (October-December) recorded an 'earnings shock,' significantly below market expectations due to intensified competition and weak demand from the Chonbang industry. LG Innotek plans to focus on improving profitability through diversification of its portfolio, including mobility.
LG Innotek reported sales of 6.6268 trillion won and operating profit of 247.9 billion won for the fourth quarter, according to a public announcement on the 22nd. Compared to the same period last year, sales decreased by 12.32%, and operating profit fell by 48.74%. These figures are about 24% lower than the securities industry forecast for operating profit consensus of 328 billion won. On an annual basis, the company recorded sales of 21.2008 trillion won and operating profit of 706 billion won, with sales up 2.9% year on year, and operating profit down 15%.
An LG Innotek official noted that the decline in operating profit compared to the previous year was due to weak demand in the Chonbang industry, such as electric vehicles and displays, as well as intensified market competition in the optical business. He added that despite the challenging business environment, the supply of high value-added products, such as high-performance camera modules, has expanded, leading to record annual sales.
By business unit, the optical solutions division recorded sales of 5.7687 trillion won, a 15% decrease compared to the same period last year, but up 19% compared to the previous quarter. Annual sales were 17.8001 trillion won, reflecting a 3% increase year on year.
An official from the company stated, "In 2023, the supply of new products for mobile customers concentrated in the fourth quarter, marking an unprecedented situation with record quarterly sales. In 2024, the supply will proceed in earnest from the third quarter as in previous years, leading to a decrease in fourth-quarter sales compared to the previous year, but on an annual basis, sales will increase."
The substrate materials business recorded sales of 383.3 billion won, up 17% year on year and 4% compared to the previous quarter. While the recovery in demand for display products such as COF (Chip On Film) has been delayed due to weak demand for Chonbang products like TVs, the supply of new mobile models has increased, resulting in a rise in sales for semiconductor substrates such as RF-SiP (Radio Frequency-System in Package). Annual sales last year were 1.46 trillion won, a 10% increase compared to the previous year.
The automotive parts business recorded sales of 474.8 billion won, down 0.2% year on year and 1% compared to the previous quarter. Sales slightly decreased due to stagnation in demand from the Chonbang industry, such as electric vehicles. Annual sales were 1.9406 trillion won, down 2% from the previous year.
On the other hand, the company explained that new orders and backlog for automotive parts (excluding vehicle camera modules) have increased for four consecutive years since 2021. As of last year, the backlog reached a record 13.6 trillion won, marking the first time it surpassed 13 trillion won, a 27% increase year on year. New orders totaled 3.9 trillion won, a 20% increase compared to the previous year.
Park Ji-hwan, Chief Financial Officer, stated, "In the future, we will drive the core components business for autonomous driving, such as vehicle sensing, communication, and lighting, while continuing to advance our business structure by nurturing new businesses in AI and semiconductor components, led by FC-BGA (flip chip ball grid array), for which we recently started mass production of products for global big tech companies."