LG sees big drop in second-quarter net profit

LG sees big drop in second-quarter net profit

LG reported a big drop in second quarter profits as its display and cell phone businesses posted losses for the period.

South Korea's LG Electronics reported a big drop in profits for the second quarter, and said its flat-panel display and mobile handset businesses both lost money during the period.

The news comes after Samsung Electronics said its second quarter net profit fell by nearly half.

LG Electronics' net profit during the second quarter was 151 billion won ($US146 million as of June 30) and net sales were 5.6 trillion won, down 69 per cent and 7 per cent respectively on the second quarter of 2004.

Price competition in several of LG's key business areas lies at the root of the difficult second quarter. Prices for flat-panel displays declined sharply in the first half of this year and that put pressure on profits at LG and other companies in the business despite better-than-ever sales of flat-screen TVs.

Sales of digital TVs rose 42 per cent on the same period a year earlier and the total number of plasma display panel modules shipped grew 113 per cent in unit terms, the company said. Despite this, total sales of digital displays fell 2 per cent and the business unit recorded an operating loss of 22 billion won, LG said.

In the company's mobile communications business, sales fell 5 per cent and operating profit crashed 94 per cent to 8.4 billion won. LG's mobile phone handset unit makes up by far the largest part of this business and it faced fierce competition in major markets. Mobile phone handset shipments hit 12.1 million units while handset operations recorded an operating loss of 4 billion won, LG said.

LG's digital appliances company reported a 6 per cent fall in both sales and operating profit and its digital media company saw sales fall 18 per cent and operating profit drop 46 per cent.

Looking ahead, LG expects the difficult business environment to persist due to continuing price competition in the handset market and pressure on flat-panel prices.

Last Friday, Samsung provided a slightly brighter business outlook. The company said monitor and notebook PC flat-panel prices had stabilised although TV panel prices were continuing to fall. In the handset market, Samsung expects average selling prices to increase, partly due to an expected increase in shipments of 3G handsets during the current quarter.

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