Tue, Jul 20, 2004 - Page 10 News List

LG Electronics profit surges on screen and phone demand

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LG Electronics Inc, South Korea's second-largest electronics maker, said quarterly profit surged 85 percent on mobile-phone sales and contributions from its flat- panel venture with Royal Philips Electronics NV.

Second-quarter net income rose to 494 billion won (US$427 million), compared with 267 billion won a year earlier, the Seoul-based company said in a regulatory filing. Sales rose 29 percent to 6 trillion won.

The company has relied on LG.Philips LCD Co, its venture with Amsterdam-based Philips, Europe's biggest consumer-electronics maker, for profit growth during the past year. A decline in prices for liquid crystal displays and price-cutting by mobile-phone makers including Nokia Oyj may lead to slower profit growth in the second half.

"Earnings were OK but not that big a surprise," said Lee Ju-an, who manages the equivalent of US$778 million at Daehan Investment Trust Management Co.

"Problem is LCD prices may decline," Lee said.

Nokia Oyj, the world's largest mobile-phone maker, said last week that earnings per share may fall by half as it cuts prices to gain market share. Samsung Electronics Co, the world's third-largest handset maker, said on Friday that Nokia's price reduction may "influence badly."

With LCDs, Samsung Electronics, the world's largest flat panel maker, said it expects LCD supply to exceed demand during the second half of the year. Last month, researcher DisplaySearch cut its price forecasts for LCDs geared for monitors and televisions, citing rising inventories.

Operating profit rose 51 percent to 395 billion won and the company forecast second-half sales would rise at least 20 percent from the year-earlier period.

The company was expected to earn net income of 432 billion won, operating profit of 381 billion won and sales of 6 trillion won, according to the average estimate of 18 analysts surveyed by Thomson Financial.

Mobile-phone sales jumped 87 percent to 1.9 trillion won, or 9.9 million units, the company said. That helped the telecommunications division generate 140 billion won of operating profit, or 6.6 percent of the division's sales, up from a 3.2 percent operating margin in the first quarter.

"Telecom margins were a pleasant surprise -- more than doubling from the first quarter," said Charles Park, an analyst at Samsung Securities Co. in Seoul.

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