LG turns the corner despite profit decline

The consumer electronics giant posted a profit for the first time in three quarters as its turnaround efforts take hold.

LG Electronics posted a sharp decline in its second-quarter profit today, but managed to reverse a recent string of losses as its turnaround efforts begin to take effect.

Roger Cheng/CNET

The consumer electronics giant posted a profit of nearly $100 million, compared with a year-ago profit of $736 million, when it counted results from a business in which it no longer has a majority stake.

Revenue rose 7 percent to $13.3 billion.

LG has been wrestling with a combination of weaker consumer demand and company-specific problems such as its slumping handset business amid intensifying competitive pressure. It has worked to cut costs and improve its product line-up over the past year.

The company says it expects modest year-over-year improvement in the third quarter as it introduces new products and ramps up its marketing effort for its 3D capabilities. In the longer term, it expects to continue cutting costs and investing in new areas.

LG's largest unit, the home entertainment business, saw a 9 percent increase in sales thanks to stronger demand for its light-emitting diode, or LED, televisions, and healthier business in developing markets. Its operating profit more than tripled from a year ago to $83 million.

Demand for its Cinema 3D televisions and smart TVs will continue, LG said.

The handset division, remains the company's weakest area. The unit posted a loss of $49.8 million on sales of $3 billion. It recorded a loss a year earlier as well, as a results of investment in research and development and the expansion into new markets.

Unlike rivals such as Samsung Electronics and HTC, the company was slower to adopt Google's Android software and is playing catch-up.

In the U.S., its prospects look brighter. LGrecently released the Revolution, a 4G LTE smartphone for Verizon Wireless. In the coming weeks, it will begin selling the Thrill 4G for AT&T , a 3D smartphone it promoted on Monday with a concert in New York.

The home appliance business continued to do well, posting a 6 percent increase in sales to $2.7 billion and an operating profit of $47.1 million. Revenue from the air-conditioning business rose 15 percent to $1.7 billion on an operating profit of $40.6 million. The unit suffered from lower margins due to higher raw material costs and unfavorable foreign exchange rates.

About the author

Roger Cheng is the executive editor in charge of breaking news for CNET News. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade. He's a devoted Trojan alum and Los Angeles Lakers fan.

 

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