LG Electronics set a record for annual sales last year as its B2B (business-to-business) businesses such as vehicle components and heating, ventilation and air conditioning (HVAC) continued to grow, but it swung to a loss in the fourth quarter for the first time in nine years due in part to weakness in the TV business. This year, it plans to focus on B2B-centered, quality-growth business areas to improve profitability and stage a rebound in results.
On the 30th, LG Electronics announced that, on a consolidation basis, it swung to an operating loss of 109 billion won in the fourth quarter from an operating profit of 135.4 billion won a year earlier. It is the first time LG Electronics has fallen into the red since the fourth quarter of 2016, when it posted an operating loss of 35.2 billion won. Fourth-quarter revenue came to 23.8522 trillion won. For last year on a consolidation basis, annual revenue was 89.2009 trillion won and operating profit was 2.4784 trillion won.
An LG Electronics official said, "Spending on marketing increased amid a delayed recovery in demand for display-based products and intensifying competition," and noted, "In the second half, we also recognized non-recurring expenses worth hundreds of billions of won from a companywide voluntary retirement program carried out to improve workforce efficiency."
LG Electronics plans to pursue a rebound in results next year by sustaining performance in key quality-growth areas: ▲ B2B (vehicle components, HVAC, component solutions, etc.) ▲ Non-HW (webOS, maintenance, etc.) ▲ D2C (subscription, online). LG Electronics' B2B revenue last year was about 24.1 trillion won, up 3% from a year earlier. Combined operating profit of the VS Business Division and the ES Business Division, the two pillars of B2B, exceeded 1 trillion won for the first time. Subscription revenue that combines products and services jumped 29% from the previous year to nearly 2.5 trillion won.
By division, the HS Business Division, which oversees home appliances, posted annual revenue of 26.1259 trillion won and operating profit of 1.2793 trillion won. Revenue was an all-time high. Operating profit also rose slightly excluding one-off expenses, demonstrating tariff response capabilities through production base optimization, price adjustments and cost improvements, and offsetting market concerns. LG Electronics said it plans to continue growth this year by expanding its artificial intelligence (AI) appliance lineup and targeting emerging markets. It also said it will steadily foster businesses such as built-ins and component solutions and keep preparations for AI Home and home robots on track.
The MS Business Division, which oversees the TV business, swung to a loss year over year with revenue of 19.4263 trillion won and an operating loss of 750.9 billion won. It was affected by a delayed demand recovery and intensifying market competition. This year, LG Electronics will strengthen its lineup not only in organic light-emitting diode (OLED) but also in liquid crystal display (LCD) with competitive products such as micro RGB. It also plans to actively cultivate demand for lifestyle lineups such as StanbyME and Easy TV. For its webOS advertising and content business, it said it will continue rapid growth by sustaining content investments and expanding partnerships.
The VS Business Division, which oversees the vehicle components business, posted revenue of 11.1357 trillion won and operating profit of 559 billion won. With smooth conversion of backlogs into revenue, both revenue and operating profit hit record highs. This year, the vehicle components business is expected to face somewhat stagnant demand from automakers due to greater macro volatility, but it plans to secure stable profitability by strengthening cooperation with automaker corporations and improving operational efficiency. It also aims to accelerate leadership in future car solutions such as software-defined vehicles (SDV) and artificial intelligence-defined vehicles (AIDV).
The ES Business Division, which oversees HVAC solutions, posted revenue of 9.323 trillion won and operating profit of 647.3 billion won. Revenue rose year over year, and operating profit also inched up excluding one-off voluntary retirement expenses. LG Electronics projected that demand will increase this year, especially in overseas markets, for high-efficiency solutions such as heat pumps using eco-friendly refrigerants. It will also continue efforts to secure opportunities in AI data center cooling solutions. It said it plans to steadily expand partnerships for commercialization of next-generation liquid cooling solutions and for the development of immersion cooling solutions.