LG Elec sees 80 percent drop in fourth-quarter profit; analysts point to thinning TV margins

Technology

Jim Tran, senior vice president and general manager go handset products for Qualcomm, speaks on the 5G collaboration between Qualcomm and LG during an LG Electronics news conference at the 2019 CES in Las Vegas, Nevada, U.S. January 7, 2019. REUTERS/Steve Marcus

SEOUL (Reuters) – South Korea’s LG Electronics Inc (066570.KS) said on Tuesday its fourth-quarter operating profit likely plummeted 80 percent from the same period a year earlier, falling well below analyst expectations.

The world’s second-biggest television set maker behind compatriot Samsung Electronics Co Ltd (005930.KS) estimated profit of 75.3 billion won ($67.03 million) for October-December last year. That would compare with the 387 billion won average of 11 analyst estimates in an I/B/E/S Refinitiv poll.

Revenue likely fell 7 percent to 15.8 trillion won, LG said in a regulatory filing, versus analysts’ 16.3 trillion won estimate.

LG did not disclose further details of fourth-quarter operations and will announce full results at the end of January.

Analysts said likely causes included profit margins for its high-end TVs being thinned by increasing competition, while the firm’s smartphone business continues to lose money.

“It’s a surprise,” said analyst Lee Jae-yun at Yuanta Securities. “Home appliance sales were worse in emerging markets and China, while its high-end TV business isn’t making profit as much as before.”

Analysts also said earnings were likely squeezed by higher year-end bonuses and marketing expenses for new handsets.

LG held a 3 percent share of the global smartphone market in the second quarter of last year, showed latest data from market tracker Counterpoint Research.

Earlier in the day, Samsung estimated a 29 percent drop in quarterly profit, its first decline in two years, as it flagged tough memory chip and mobile phone markets.

Reporting by Heekyong Yang and Ju-min Park; Editing by Christopher Cushing

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