LG Electronics said a clear recovery in the global finished-vehicle market will be difficult for the time being due to stagnant electric-vehicle demand and external uncertainty. It said the heating, ventilation and air conditioning (HVAC) business saw overseas air conditioner sales rise, but profitability fell because of a domestic construction slowdown and higher logistics costs.
On a conference call for second-quarter results on the 30th, Kim Ju-yong, executive director in charge of management at LG Electronics' Vehicle component Solutions (VS) Business Unit, said, "As stagnation in electric-vehicle demand and uncertainty in the external environment persist, we expect a clear recovery in global finished-vehicle demand to remain limited for the time being."
LG Electronics' vehicle components business, driven by growth in infotainment, posted second-quarter revenue of 3.3029 trillion won and operating profit of 191.2 billion won. Both revenue and operating profit were the highest for any second quarter. The operating margin was tallied at 6.3%.
Kim said, "There will be some impact from market uncertainty, but we will maintain stable revenue growth," adding, "We will secure stable profitability through cost improvements and operational efficiencies."
The HVAC business showed diverging trends at home and abroad. In Korea, revenue was sluggish due to a slowdown in construction and intensified market competition, but overseas, revenue increased year over year as air conditioner sales rose.
Shin Dong-hoon, executive director in charge of management at LG Electronics' Eco Solutions (ES) Business Unit, said, "In the Korea market, revenue was sluggish due to intensified competition and a slowdown in construction," adding, "In overseas markets, revenue grew year over year on increased air conditioner sales."
Despite higher revenue, the HVAC business's profitability fell year over year. Higher logistics costs stemming from war in the Middle East, market competition expense, and increased personnel costs related to new-growth businesses had an impact.
Shin said, "There were improvement factors such as higher revenue, but profitability declined year over year due to higher logistics costs stemming from the Middle East war, competition expense, and increased personnel costs related to new growth drivers."
LG Electronics plans to boost profitability in the domestic market in the third quarter by focusing on subscriptions and direct online sales. Overseas, it will expand sales of eco-friendly, high-efficiency products, products suited to regional climates, and customized customer solutions.
Shin said, "A challenging business environment will continue due to the prolonged Middle East war and intensified competition in the market," adding, "We will accelerate global growth by expanding overseas revenue."