|LG Electronics employees conduct quality control checks of its Objet Collection Styler steam closets at its plant in Changwon, South Gyeongsang Province, March 2. Courtesy of LG Electronics|
By Baek Byung-yeul
With LG Electronics expected to post its best-ever quarterly results thanks to soaring demand for home appliances in the first quarter, industry analysts said Thursday the tech company still has more room to grow due to its decision to exit the smartphone business.
On Wednesday, LG Electronics announced its earnings guidance and expected its sales to hit 18.8 trillion won ($16.8 billion) and operating profit at 1.51 trillion won in the January-March period, up 22.7 percent and 39.2 percent year-on-year, respectively. The figures are the highest-ever in its history.
Though the company didn't break down the figures across its business divisions, analysts attributed LG's performance to increased demand for its high-priced home appliances.
Plus, the company also has benefited from increased sales of its appliances offering a steam sanitization feature, with more people paying attention to health and personal hygiene after the outbreak of COVID-19.
Analysts added the company will continue to outperform expectations in the following quarter.
"The second-quarter operating profit is expected to rise 124 percent year-on-year to 1.134 trillion won," said Noh Kyung-tak, an analyst at Eugene Investment & Securities. "At a time when the base effect caused by COVID-19 is still effective, demand for seasonal home appliances such as air conditioners and premium products such as OLED TVs will be maintained."
The analyst added LG's second-quarter performance will be buoyed by the abolition of its mobile communications division, which supervises its smartphone business. On April 5, LG officially announced its withdrawal from the phone business as of July 31. LG's mobile business has seen operating losses since the second quarter of 2015 and its accumulated operating losses reached 5 trillion won last year.
Meanwhile, LG Electronics announced it will offer software upgrades for its premium smartphones for up to three years, one year longer than its previous policy.
"LG's performance is expected to be greatly improved by excluding the operating losses of its mobile communications division," the analyst said.
"To thank and reward consumers for showing trust in LG products, we've decided to expand the amount of time it offers major system upgrades. With the new policy, we will offer operating system upgrades until 2023 for the LG Velvet and the LG Wing smartphones which were released last year," the company official said.
In addition, the company will provide after-sales service for smartphone parts for up to four years in Korea. "At its 120 service centers nationwide, LG phone users will be able to receive after-sales service for four years from the production date," the official said.