LG Electronics Inc (KRX:066570) reported its first-quarter earnings this morning, reporting a 91 percent decrease in net profits. The company attributed the drop to weakening television sales and losses from its investments into affiliates.
Net profits for the first quarter were 22.1 billion won ($20 million), compared to 247.5 billion won in the same quarter a year ago. LG Electronics Inc (KRX:066570) did report a surge in sales of its handsets, but it wasn’t enough to offset the price cuts the company made on its televisions, which slashed the company’s profit margins in the division. The company’s home entertainment unit reported an 82 percent decrease in profits.
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Handset sales rose to a record 10.3 million units during the first quarter, pushing the South Korean company into the third spot on the list of the world’s largest phone makers according to sales, displacing Taiwanese company HTC. However, its 3.3 percent market share is still far below that of major rivals Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)
Another big problem for the South Korean company was currency rate changes. Its Japanese competitors had a major edge over the company.
LG Electronics Inc (KRX:066570) reported a 13 percent decrease in operating profits, which fell to 348 billion won, compared to 402.7 billion won in the same quarter a year ago. Revenue rose 6.8 percent to 14.1 trillion won. Consensus for the company’s net income was 235.8 billion won, according to an average of analysts polled by Dow Jones Newswires.
The company’s CFO said he expected profitability to return in the second quarter of the year as it released new models, but he warned investors that television demand is likely to continue being weak.