- Q3 2022 revenue increased 8% YoY to reach ₩16.12 trillion helped by higher sales of vehicle solutions.
- Vehicle solutions revenue jumped 46% YoY during the quarter, helped by the improved global semiconductor supply and increased auto production in China.
- Operating profit increased 33% YoY to reach ₩0.79 trillion.
LG Electronics (LG) reported an 8% YoY growth in Q3 2022 revenue to reach ₩16.12 trillion despite considerable macro headwinds but helped by higher sales in its vehicle solutions and business-to-business segments. Quarterly gross profit rose 5% YoY to ₩5.05 trillion while operating profit grew sharply by 33% YoY to reach ₩0.79 trillion.
During the quarter, investor sentiment was weak due to a steep devaluation of the South Korean won against the US dollar, hurt by strong economic headwinds. The Korea Composite Stock Price Index (KOSPI) fell 6.5% in Q3 2022, which negatively affected LG’s performance.
Financial highlights:
- Revenue from the consumer electronics segment fell 1% YoY to ₩11.19 trillion due to increased logistics costs and lower demand for premium products like TVs. This segment contributed to 69% of total revenue during the quarter.
- Among all the segments, vehicle solutions was the best performer. The segment’s revenue jumped 46% YoY to ₩2.35 trillion during the quarter helped by the relative improvement in the global semiconductor supply chain. The segment accounted for 15% of the company’s total revenue. China faced a lot of factory shutdowns in the preceding quarter due to regulations related to the COVID-19 pandemic. As factories reopened in Q3, there was an increase in production which helped meet the heightened demand for electronics components in the automotive industry. This, combined with an improved cost structure, helped LG achieve strong growth figures for the period.
- Revenue from other businesses grew 23% YoY reaching ₩2.60 trillion. Despite an increase in sales, the profitability of this segment decreased 63% due to lower demand for IT products and higher raw material costs.
- LG’s gross profit increased 5% YoY to reach ₩5.04 While the company’s operating profit grew sharply, gross profit growth was relatively muted because of increased market competition, low consumer demand, increased raw material prices, increased marketing expenses and the energy crisis.
Market outlook:
The current global business environment is quite difficult, burdened by rising inflation, supply chain disruptions, geo-political tensions, increased logistic costs and the energy crisis, which have weighed negatively on consumer sentiment across industries. LG plans to prioritize on the development of new software platforms and adjust its channel inventory to overcome the ongoing crisis. LG will focus on its premium consumer electronics products and will likely maintain maximum margins to secure high profits. The company will also apply cost-saving initiatives to reduce raw material costs.
The vehicle solutions segment has the highest potential to expand as the global semiconductor shortage is easing out and OEMs like Honda, GM and Stellantis are working to jointly produce battery cells. Moreover, LG has secured an order worth ₩1 trillion from Tesla to supply automotive camera modules for the Tesla Model 3, Model Y and Cybertruck. These new deals will drive LG’s vehicle solutions segment to a great future.
LG is also strengthening its focus on new technologies like metaverse and robotics. It recently partnered with KT Corporation to expand its AI robot service business. LG will also establish an R&D centre and develop robots for logistics, education and healthcare services. LG’s strategic partnership with TmaxMetaverse will boost development across metaverse solutions and web-based metaverse services. The company will have the opportunity to capitalize on these technologies by the time they mature at the end of the decade, which will help it boost revenue.
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