It is mixed news from South Korea. While Samsung surprised everyone, even the analysts, by posting a 50 percent jump in their operating profit, the company’s best performance in the last three years, rival LG Electronics (KRX:066570) revealed the fourth quarter of 2016 wasn’t at all good for them. It would be the first time in six years LG will report an operating loss.
LG to Report $29.36 Million Loss in Quarter Four
The number two television maker in the world after Samsung (KRX:005930), LG Electronics revealed on Friday there is likely to be a 35 billion won or $29.36 million loss in the October-December period. The last time LG had posted such poor results was in the fourth quarter of 2010. Interestingly, last year, 21 analysts had looked deep into the performance of LG and made their predictions. Only three of these analysts had predicted that LG may report a loss in the fourth quarter of 2016.
In what is a surprise is that revenue in the quarter actually is likely to be 14.8 trillion won, which means an increase of 1.5 percent. So how LG Electronics still manages to end up making a loss is not clear. This will only be explained once the full results are disclosed, which is likely around the end of January.
However, LG did give a hint earlier that the quarter might not be so good. Last October, the company had disclosed there would be poor revenue earnings from their appliance business. Plus, they had also said that higher promotional expenses for the holiday season are also likely to pull the figures down in the fourth quarter.
Poor Performance by the Mobile Division Could Be the Culprit
Though Samsung posted their best performance in the last three years, but their mobile division has reported 96 percent profit decline over last year. Most of the company’s profit is coming from the components business.
Analysts are predicting that LG Electronics (KRX:066570) has been hit hard by mobile sales too. There is low demand for premium G5 smartphones at this time. Sales of lower-end products are likely to have come down as well. In fact, the smartphone division of LG has been making a loss since the second quarter of 2015.
The television division might also have suffered this time because of higher prices of liquid crystal display just before the 2016holiday season. TV margins could have dropped as a result.