LG Posts Q4 Net Loss Despite Jump in Phone Sales
Marketing costs, strong won dampen earnings.
Mon, January 27, 2014
IDG News Service (Tokyo Bureau) — LG Electronics posted a consolidated net loss for the fourth quarter of 2013 as earnings were weighed down by a strengthening won and large advertising expenses for its flagship 5.2-inch G2 Android smartphone.
Seoul-based LG, the second-largest maker of TVs in the world after Samsung Electronics, booked a consolidated net loss of 63.5 billion Korean won (US$60.4 million as of Dec. 31, the last day of the period reported), an improvement from a 478.2 billion won loss in the fourth quarter of 2012 but down from a net profit of 108.5 billion won in the third quarter of 2013.
Operating profit, however, doubled to 238 billion won in the quarter from 117 billion won a year earlier, beating a 223 billion won estimate by 35 analysts surveyed by Thomson Reuters I/B/E/S.
Operating profit can be a useful yardstick of corporate health because it shows the performance of core operations, excluding other factors like investments.
Overall sales at LG were marginally up to 14.92 trillion won from 14.80 trillion won a year earlier.
Its mobile division sold 13.2 million smartphones, up a respectable 54 percent from a year earlier with LTE sales gaining 110 percent, but the unit posted an operating loss of 43.4 billion won from a profit of 56.5 billion won a year earlier.
The company blamed the results on "higher brand marketing expense and intensified price competition in the market."
LG said it expect the smartphone market to continue growing, especially for LTE phones, with competition intensifying.
One of its weapons is the bendy G Flex. Billed as the world's first curved smartphone, the G Flex has a concave, 6-inch 720p OLED display and is hitting the U.S. this winter with availability on AT&T, T-Mobile, and Sprint.
In reporting its earnings for the fourth quarter of last year, rival Samsung Electronics also said the buoyant South Korean currency had depressed its performance, taking about 700 billion won off the value of its earnings.