LG is in a tough spot. The overall company is doing very well, having just finished its most successful year ever. However, the company's mobile division is just burning money, and earnings there are moving in the wrong direction after LG pledged to turn a profit on smartphones within a year.
LG pulled in a whopping KRW 62.3 trillion ($53.0 billion) in 2019 with a profit of KRW 2.44 trillion (USD 2.07 billion). In the 4th quarter of 2019, it earned KRW 101.8 billion (USD 86.5 million). That's all thanks to improved sales from the home appliance and entertainment divisions. Mobile is still dragging the company down, though. Late last year, it looked like LG might have a shot at pulling its mobile communications group out of the red, but losses increased in the final quarter of 2019.
LG Mobile bled KRW 332.2 billion ($278.6 million) in Q4. That's much more than the KRW 161 billion loss in Q3 and even higher than the KRW 318.5 billion loss from Q4 2018. Over the full year, LG lost $858.34 million on smartphones. LG says its losses in mobile come from lower than expected sales and higher marketing costs for flagship phones. It's counting on consumer interest in 5G to help it turn the corner, but LG has an even deeper hole to dig itself out of now.
LG ANNOUNCES 2019 FINANCIAL RESULTS
Record Sales and Profitability for Home Appliances Contribute to
Highest Annual Revenue in Company History
SEOUL, Jan. 30, 2020 — LG Electronics Inc. (LG) today announced another record breaking sales year with revenues of KRW 62.3 trillion (USD 53.0 billion) in 2019, reflecting strong demand for premium home appliances such as LG SIGNATURE and high-growth, category-creating products. Full-year operating profits of KRW 2.44 trillion (USD 2.07 billion) were strong again in 2019 although 10 percent lower than 2018 due to increased investments in marketing and future technologies.
Fourth-quarter 2019 revenues of KRW 16.06 trillion (USD 13.65 billion) were 1.8 percent higher than the same period in 2018 and 2.3 percent higher than the previous quarter while quarterly operating income of KRW 101.8 billion (USD 86.5 million) was a sound 34.5 percent higher than the final quarter of 2018.
The LG Home Appliance & Air Solution Company had a strong year, reporting record full-year 2019 revenues of KRW 21.52 trillion (USD 18.29 billion), an 11 percent increase from the previous year, and operating profit of KRW 2 trillion (USD 1.7 billion), its highest in history. Quarterly sales of KRW 4.62 trillion (USD 3.92 billion) – the highest fourth quarter in the company’s history – were nearly 7 percent above the same period the previous year due to healthy demand in North America and Europe while operating income of KRW 122.2 billion (103.86 million) increased 8.5 percent from the same period 2018.
The LG Home Entertainment Company reported full-year revenues of KRW 16.15 trillion (USD 13.73 billion), relatively unchanged from 2018 while operating income of KRW 980 billion (USD 833 million) declined from the previous year. Fourth-quarter 2019 sales of KRW 4.59 trillion (USD 3.90 billion) remained unchanged from the same period of 2018 and 18.7 percent higher than the previous quarter, resulting in an operating income of KRW 110 billion (USD 93.5 million) due in large part to increased marketing costs.
The LG Mobile Communications Company recorded 2019 revenues of KRW 5.97 trillion (USD 5.07 billion). Fourth-quarter sales of KRW 1.32 trillion (USD 1.12 billion) declined from the same period a year earlier due to sluggish sales of mass-tier smartphones in overseas markets. A full-year operating loss of totaled KRW 1.01 trillion (USD 858.34 million) reflected increased marketing expenses to support flagship devices. LG’s 2020 mobile business improvement strategy hinges on the introduction of new mid to premium 5G smartphones and continued cost-efficiency efforts.
The LG Vehicle Component Solutions Company reported solid full-year 2019 revenues of KRW 5.47 trillion (USD 4.65 billion), a 27 percent increase from 2018 and the highest annual sales in the company’s history. Quarterly revenues of KRW 1.36 trillion (USD 1.15 billion) were 3 percent lower than the fourth quarter of 2018 as a result of slower auto sales. Despite a 2019 operating loss of KRW 194.9 billion (USD 165.6 million), the company expects to benefit from additional cost competitiveness and enhanced profitability as the electronic vehicle market continues to expand in 2020 in response to stronger European environmental regulations.
The LG Business Solutions Company recorded 2019 revenues of KRW 2.67 trillion (USD 2.27 billion) with an operating income of KRW 246.8 billion (USD 209.8 million). Fourth-quarter revenues of KRW 672.8 billion (USD 571.8 million) were 13 percent higher than the same period 2018 while quarterly operating profit of KRW 66.4 billion (USD 56.4 million) remained healthy as a result of strong demand for premium digital displays and solar modules.
2019 4Q Exchange Rates Explained
LG Electronics’ unaudited quarterly earnings results are based on IFRS (International Financial Reporting Standards) for the three-month period ending December 31, 2019. Amounts in Korean won (KRW) are translated into U.S. dollars (USD) at the average rate of the three-month period of the corresponding quarter — KRW 1,176.57 per USD.