LG misses Q2 estimates, profit tumbles

SEOUL, S.KOREA: LG Electronics Inc, the world's No.2 TV maker and No.3 handset maker, said on Wednesday that its operating profit had plunged 90 per cent in the April-June quarter, due to a loss at its handset division as it struggled to keep up with rivals in the smartphones race.

In the second quarter, LG posted an operating profit of 126 billion won ($106.6 million) versus 1.24 trillion won a year ago and a consensus forecast of 210 billion won by 12 analysts polled by Thomson Reuters.

As Apple Inc and Samsung Electronics launch new models in the lucrative smartphone sector, LG's handset unit is falling behind as profit margins tumble at its TV business due to a weak euro and rising competition.

A fragile global economy and an uncertain outlook due to weak European economies could also hit demand for flat-screen TVs and other home appliances.

"What LG needs most is a hit smartphone model to turn around the business and investors will have to wait another six months to see LG finally managing to pull it through," said Cha Kyung-jin, a fund manager at Golden Bridge Asset Management, which holds LG shares.

Sees handset unit recovery from late Q4

LG Electronics said its loss-making mobile phone business would continue to struggle in the current quarter but would start recovery from end-2010.

"We are increasing investment in research and development to launch competitive smartphone models and thus any meaningful recovery is unlikely in the near future," LG Chief Financial Officer Jung Do-hyun told analysts.

"Our handset business will continue to experience difficulties in the third quarter and would start recover from the late fourth quarter."