LG Sees Losses Widen by Almost Double on Weak Smartphones Sales - TheStreet

LGElectronics (LPL) - Get Report , the world's second-largest TV maker, saw net losses widen by almost double in the fourth quarter after its smartphones and tablets business continued to suffer losses, dragging down sales expansions enjoyed by other business units.

The Seoul, South Korea-based electronics maker reported a net loss of 258.8 billion won ($222 million) in the fiscal fourth quarter of 2016 Wednesday, compared with a loss of 140.5 billion won a year earlier. At the operating level, LG booked a loss of 35.2 billion won, plunging from a profit of 349.0 billion won.

LG shares closed up 0.18% at 54,200 won in Seoul, against a 0.06% gain for the benchmark KOSPI Compoiste Index, although shares have only gained 1% in the past 12 months.

The maker of TVs, smartphones, and refrigerators struggled to convert sales growth into profit across the board, with the exception of the mobile communications segment which suffered a sales drop and dragged down the overall company performance even steeper.

The mobile communications segment, involved in smartphones, tablets, smart watches and other mobile devices, saw losses widen by nearly eight-fold at the operating level year on year to 467.8 billion won on a 21% sales drop to 2.9 trillion won. The business has reported an operating loss for eight consecutive quarters, with the degree of losses widening for a second quarter.

LG attributed the loss in the business to weak sales of the G5 smartphone, marketing expenses for its premium V20 smartphone, and restructuring costs. Smartphone shipments dropped 8% year.

At its peak in 2014, LG enjoyed a market share of more than 5% for smartphones, but has since dropped off the map, giving way to large player such as Apple (AAPL) - Get Report and Samsung (SSNLF)  as well as other smaller Chinese players, according to Statista.

Two other segments saw profits drop despite enjoying increases at the top level.

The home appliance & air solutions segment booked a 30% drop in operating profit despite 6% sales growth, while the vehicle components segment tumbled to a loss despite a 66% sales jump.

LG said marketing expenses were the cause for the loss profit drop in the home appliance business, which enjoyed strong sales in washing machines and freezer refrigerators. Meanwhile, R&D costs were to blame for the vehicle components business.

Home entertainment was the only business that saw both sales and profit growth. Even so, profit more than halved from the previous quarter. OLED and ultra high definition TVs provided bright spots, the company said.

For 2017, LG aims to regain a strong position for its premium smartphones by launching a flagship model and secure profit through cheaper models. The company plans to unveil a new flagship model -- the G6-- on February 26. 

Premium models are also the company's focus in the home appliance, home entertainment and vehicle component businesses.

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