LG Electronics Inc. said Friday its second-quarter operating profits are expected to have dropped 15.4 percent from a year earlier, mainly due to its sluggish smartphone business.
In an earnings guidance, the South Korean electronics maker said it expects to post 652.2 billion won ($557 million) in operating profits in the April-June period — far below the average market expectation of around 774 billion won.
Its sales are expected to be 15.6 trillion won in the second quarter, a 4.1 percent surge from a year earlier, the firm said.
The company did not provide detailed performances for each division, saying it will release its earnings report later this month.
Analysts attributed the worse-than-expected earnings to the sluggish mobile business, which was expected to have eroded robust profits from the home appliance division.
They estimated the mobile division’s operating deficits at over 200 billion won in the second quarter, which would mark the ninth consecutive quarterly loss.
Although LG’s first 5G smartphone, the V50 ThinQ, was well-received in the domestic market since its launch in early May, it failed to provide strong momentum to help the mobile division make a turnaround in the second quarter, they noted.
The Korean phone maker launched the V50 in the United States in partnership with Sprint and Verizon in the last two months, respectively, but the initial response was lukewarm with lack of 5G infrastructure in the nation.
LG’s share in the U.S. smartphone market stood at 16 percent in 2018, according to industry tracker Strategy Analytics.
“LG V50 ThinQ failed to contribute sales increase in the North American market,” said Park Gang-hoo, an analyst at Daishin Securities. “Given the heavy marketing costs, the 5G smartphone was limited in improving the mobile division’s profitability.”
Market watchers say strong demand for LG’s home appliances might have improved its overall sales.
LG Electronics has enjoyed brisk sales of products related to air quality, such as air purifiers, dryers and clothing-care home appliances, and revenue from their rental service has also been on the rise as more people opt for renting gadgets.
“The home appliance businesses drove up the overall performance thanks to robust sales of premium lineup and new lifestyle products, such as air purifiers and garment dryers,” Koh Jung-woo, an analyst at NH Investment & Securities, said. “LG’s TV business likely suffered due to weak demand for LCD products and intensifying competition with Chinese makers, and its smartphone division continued to book losses.”
Shares of LG Electronics tumbled 5.22 percent to 72,600 won on the Seoul bourse, far below the KOSPI’s 0.09 percent gain. The earnings guidance was announced before the market closing.