A week after EU fined LG over cartel, Korean firm profit declines 36% Sinking television division pulls down LG profit

Seoul, April 30: South Korean consumer electronics maker LG Electronics Inc has reported a weaker- t han- e xpected first-quarter profit, as the television division sank to its first operating loss since 2010.

The world’s No. 2 TV maker behind Samsung Electronics Co Ltd blamed weaker currencies in emerging markets for the TV division’s operating loss, although it said conditions should improve in the second quarter.

Analysts have cut their earnings outlook for LG due to the currency moves, which make LG’s screens more expensive in markets such as Brazil and Russia.

The shocking operating loss comes just a week after the European Court of Justice upheld a 210 million euro ($224.8 million) fine imposed on South Korea’s LG Display for participating in a cartel of LCD panel makers between 2001 and 2006.

LG’s January-March operating profit fell 36.2 per cent to 305 billion won (£186 million) from a year earlier, below a 319 billion won mean estimate from a Thomson Reuters survey of 35 analysts. The TV division’s operating loss stood at 6.2 billion won, compared with a 216 billion won profit a year ago and a 2.1 billion won profit in October-December.

The firm said it hoped to boost TV margins by sell- ing a greater portion of premium products in the second quarter, but it gave no indication of when it expected the screen business to return to profitability.

The mobile division turned a profit of 72.9 billion won, rebounding from a 7.3 billion won loss a year earlier to post its fourth consecutive quarter of positive earnings.

The launch of its new flagship G4 smartphone in South Korea earlier Wednesday would further improve profits, the company said.

The phones come with a 5.5-inch display, a leather back cover, better cameras and upgraded components like a new Qualcomm Inc Snapdragon 808 chip. LG plans to sell 12 million G4 phones, up from nearly 10 million G3 phones sold since their May 2014 launch.

The South Korean electronics major was accused of participating in a cartel of LCD panel makers between 2001 and 2006.

LG Display, whose largest shareholder is LG Electronics , was initially fined 215 million euros. The EU’s General Court cut the fine by 5 million euros last year.

LG Display then appealed, seeking a greater reduction of the fine. It argued that the Commission, in calculating the fine, should not have taken into account panel sales to the company’s then parents LG Electronics and Philips.

It said those sales could not have been affected by the cartel as they were made at a preferential price. However, the court said that these should be considered as sales to independent third parties.

It added that the fine should be determined by overall sales on the market affected by the infringement.