LG Electronics’ second-quarter net profit slumps amid weakness in phones

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LG Electronics’ 2Q net profit falls 33 percent

SEOUL, South Korea — LG Electronics, a top global manufacturer of consumer electronics and home appliances, said second-quarter net profit fell by a third amid a decline in sales and an operating loss in mobile phones.

LG Electronics, the world’s third-biggest maker of flat screen TVs and mobile phones, earned 856 billion won ($722.4 million) in the three months ended June 30, it said Wednesday. That was down 33 percent from a record net profit of 1.28 trillion won a year earlier.

Sales in the second quarter fell a marginal 0.7 percent to 14.4 trillion won from 14.5 trillion won.

Seoul-based LG Electronics Inc. said that sales of flat screen televisions were a bright spot, rising 47 percent to 6.3 million sets.

Mobile phone handset sales rose 2 percent to 30.6 million units on continued growth in emerging markets and the introduction of new smartphones including the Ally and Optimus Q.

But revenue from handset sales fell 31 percent to 3.37 trillion won and the company suffered an operating loss of 120 billion won for the devices, compared with a profit of 620 billion won the year before. Its last handset operating loss came in the second quarter of 2006, according to LG spokeswoman Im Se-ye.

The company cited lower average selling prices in developed markets and money spent on research and development and marketing as reasons for the weak performance.

LG’s total operating profit — seen as a direct indicator of business performance before taxes, dividends, asset sales and other items figured into net profit or loss — plunged 90 percent to 126 billion won from a record high of 1.24 trillion won the year before.

The company ranks No. 3 behind South Korean rival Samsung Electronics Co and Japan’s Sony Corp. in flat screen TVs by market share, according to LG. It also ranks No. 3 in mobile phones behind Nokia Corp. of Finland and Samsung, which holds the No. 2 spot.

Among LG’s products are Infinia TVs and Lotus Elite, Chocolate Touch, Rumor Touch, Shine II and Wine II mobile phones.

The company, founded in 1958 as Goldstar, also manufactures household appliances including refrigerators, washing machines and air conditioners.

Sales in LG’s home appliance, business solutions and air conditioning businesses all rose, the company said.

Looking ahead, LG Electronics said it expects overall “modest growth” in the third quarter in line with the ongoing world economic recovery.

“Strong demand, expansion of premium product line-up and the launch of new LED TV products will continue to drive profits” in the third quarter for its home entertainment business, which includes televisions, the company said.

Shares in LG Electronics, which released results during afternoon trading, fell 2.9 percent to close at 101,000 won. The company’s shares rose 62 percent in 2009.

(This version CORRECTS figure on handset revenue to 3.37 trillion won instead of 3.38 trillion won.)