By LG Electronics, the South Korean consumer electronics giant, reported a 42% drop in net profit for the second quarter due to a delayed recovery in demand for home appliances and televisions, as well as higher marketing costs caused by intense market competition.
For the period of April-June, net profit reached 195.30 billion won ($153.4 million), falling short of the FactSet-compiled consensus forecast of KRW420.57 billion.
Despite the decline, LG Electronics remains on track for a recovery following a profit turnaround in the previous quarter.
Revenue for the quarter increased by 2.7% compared to the previous year, reaching KRW19.998 trillion, in line with the company’s preliminary forecast. However, operating profit experienced a 6.3% decline, falling to KRW741.90 billion, which was below its earlier estimate.
LG Electronics attributed the lower-than-expected earnings to a one-off provision worth KRW151 billion, which was set aside to assist General Motors in covering the increased recall cost of LG-supplied electric-vehicle batteries.
Furthermore, the company faced challenges in its home-appliance and television segments due to intense business competition and higher marketing costs. However, its vehicle-component segment saw steady growth and improved profitability, driven by increased production from client car makers and a large backlog of work.
Market analysts believe that LG Electronics will benefit from lower logistics and raw-material costs in the future.
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