Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Q2 revenue grew year over year due to qualitative growth in core businesses like home appliances, TV, and IT.
- Operating profit increased significantly year over year despite higher component prices, thanks to sales leverage and profitable B2B business.
- LG Electronics Inc (STU:LGLG, Financial) plans to maintain solid profitability through global operation optimization despite potential logistics cost increases.
- The company is expanding its business model, including the acquisition of Athom, a smart home platform provider, and increasing direct sales online.
- LG Electronics Inc (STU:LGLG) continues to strengthen its market position in home appliances and TV by broadening its B2B portion, including HVAC and automotive electronics.
Negative Points
- Difficulties are expected to continue in the second half of the year due to delays in interest rate cuts and uncertainties in freight rates.
- Operating profit for the home entertainment division decreased slightly year over year due to rising LCD panel costs.
- The business solution division recorded an operating loss despite increased sales due to rising exchange rates, logistics costs, and component prices.
- The home appliance business faces challenges with weak demand in the US and Europe and increased competition and overhead costs.
- The vehicle component solutions division is experiencing market uncertainties, including a slowdown in EV demand.
Q & A Highlights
Q: Can you share the progress and profitability of the webOS platform and your KRW1 trillion goal for 2024? Will growth and profitability sustain over the mid to long term?
A: Our webOS platform business is performing well, driven by the shift from linear TV ads to connected TVs. We have surpassed our first-half targets and expect sales to exceed KRW1 trillion this year. We are expanding our footprint beyond North America to Europe, LATAM, and Asia, focusing on the strength of webOS and high-quality content.
Q: What is the status and outlook of the subscription business in the home appliance division?
A: The subscription business is growing, with over 20% of revenue in Korea and double-digit profitability. We are expanding into global markets, starting with Malaysia, Taiwan, and Thailand, and plan to enter the US and Europe. We expect continuous growth in subscription revenue.
Q: What is your target for the order backlog in the Vehicle Component Solutions (VS) division by the end of the year?
A: We expect our order backlog to remain over KRW100 trillion by year-end. Infotainment accounts for mid-50%, EV components for low-30%, and lamps for mid-10% of the backlog. We are responding to market demands with new programs and activities to win new orders.
Q: How is the B2B business contributing to overall sales and what is the outlook?
A: B2B business leads our sales growth, contributing 35% of total sales in the first half of 2024. We aim for B2B to make up 40% of sales by 2030. We are focusing on vehicle components, HVAC, data center cooling, EV chargers, and information display solutions to drive growth.
Q: What are your plans to enhance profitability in the Home Appliance (H&A) division given the increased competition and overhead costs?
A: We plan to launch new models, reposition price levels, expand B2B business, and focus on volume zone strategies. We aim to overcome rising ocean freight and marketing costs through logistics innovation and cost enhancements, expecting improved operating profit year-on-year.
Q: Are there any plans for an IPO of your Indian subsidiary?
A: While there is significant interest in an IPO for our Indian subsidiary, no official plans are currently underway. We are reviewing various avenues considering corporate value, growth strategy, and capital management.
Q: What is the expected sales growth for the Vehicle Component Solutions (VS) division this year?
A: Despite the slowdown in EV market demand, we expect high single-digit year-on-year growth, driven by stable sales in infotainment and high-value automobile components.
Q: How are the robotics and EV charging businesses performing in the Business Solutions (BS) division?
A: For robotics, we are focusing on delivery and logistics robots, expanding from SMB to hospitality and logistics. For EV chargers, we launched in 2023 and are targeting the North American market this year. We aim to lead division sales over the mid to long term through these areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
