Mobiles help LG beat forecast

13:46, October 22, 2009      

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South Korea's LG Electronics posted third-quarter net profit that beat expectations thanks to a soft local currency that boosted its price competitiveness and a strong line-up of mobile phones.

The world's No 3 mobile phone maker is headed for a weaker fourth quarter on higher marketing costs and price competition for its bread-and-butter handsets and flat-screen TV sets, as well as a strengthening won.

"A stronger won will definitely hit its overseas sales," said Chang In-whan, CEO and fund manager at KTB Asset Management, which owns LG shares.

"It wouldn't be a big problem if the won remains at around 1,150 per dollar, but the currency is seen strengthening past the 1,100 level next year."

Still, analysts are upbeat about a strong performance in 2010 thanks to brisk sales of premium products such as smartphones and TVs using light emitting diodes.

"It is just a matter of time. By the second or third quarter of next year, LG should notch up significant sales of LED TVs," said Harrison Cho, an analyst at KB Investments and Securities.

LG, which trails Nokia and Samsung Electronics in mobile phones, reported yesterday a global-basis operating profit of 850 billion won (445 million pounds) in the third quarter, up from 571 billion won a year ago.

This was above a consensus forecast of 757.8 billion won by analysts polled by Thomson Reuters.

"Entering the peak season for TV, modest sales growth is expected (in the fourth quarter) both on a quarter-over-quarter and year-over-year basis," LG said in a statement.

"Price erosion in the TV and handset business and an increase in marketing/R&D investment will likely result in lower profitability quarter-over-quarter."

Quarterly net profit was 807 billion won, up sharply from a year ago when it was hit hard by currency-related losses.

The figure also beat a consensus forecast for a 667 billion won net profit from Thomson Reuters.

This month, Samsung's stronger-than-expected earnings forecast failed to impress investors, who are worried a fast recovering won and competition are starting to cut into profits.

LG also benefited from strong sales of flat-screen TVs and record operating profits at affiliate LG Display .

The local currency's weakness has helped LG and its key rivals to weather the global downturn.

LG sold a record 31.6 million handsets in the third quarter, up/down from 29.8 million units sold in April-June.

Shares in LG Electronic rose 1.7 percent to close at 120,500 won.

The company's share price has risen 61 percent so far this year, outperforming the market's 47 percent gain.

Last week, Nokia reported its worst results, hit by a major writedown and as it lost market share in smartphones.

Source:China Daily
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