BUSINESS

Samsung, LG defend operating profit in Q1

By Lim Jeong-yeo

‘Economic effects of COVID-19 will rub off on profit starting Q2’

  • Published : Apr 7, 2020 - 09:18
  • Updated : Apr 7, 2020 - 17:37

(Yonhap)
South Korea’s leading tech firms Samsung Electronics and LG Electronics reported better-than-expected operating profit for the first quarter of 2020, despite the sluggish economy on the back of the ongoing global virus pandemic.

Samsung on Tuesday estimated a revenue of 55 trillion won ($45 billion) and operating profit of 6.4 trillion won, slightly above the stock market projections, while LG Electronics posted 14.9 trillion won revenue and 1.09 trillion won operating profit.

While LG’s revenue was a 1.2 percent drop from a year ago and down 8.3 percent from 16.6 trillion won in the fourth quarter, its operating profit was a 21.1 percent increase on-year and well beyond the market consensus which had been at around 870 billion won.

Industry analysts credited LG’s “earning surprise” to heightened demand for the company’s hygiene maintenance home appliances such as clothes dryers and air purifiers.

LG also reportedly benefited from increased sales of its organic light-emitting diode TVs while Chinese competitors navigated trenches in business plans amid the coronavirus pandemic.

As for Samsung, the company’s first quarter revenue was an 8.1 percent slide from the previous quarter, but a 4.9 percent rise on-year. Likewise, the operating profit fell 10.6 percent compared to the quarter before but went up 2.7 percent on-year.

This first quarter operating profit falls short of Samsung’s February suggestion of 6.6 trillion won, however, it still hovers above the market consensus that had been 6.2 trillion won.

Samsung has not shared detailed performance per division, but industry watchers are of the view that its semiconductor and smartphone businesses must not have fallen far off the radar.

Despite the global pandemic, semiconductor manufacturing lines suffered no impact. On the contrary, the surge of demand for non-face-to-face services lead to increased orders for memory chips for servers, experts said.

According to local industry reports, those familiar with the tech giant predicted operating profit from semiconductor to account for around 3.7 trillion won this time.

The economic effects of COVID-19 will start being reflected from the second quarter, industry watchers surmised.

Both Samsung and LG’s handset and home appliance businesses are expected to face headwinds in the second quarter, analysts here predict, due to the global plant shutdowns and hampered sales in the US and Europe due to COVID-19.

By Lim Jeong-yeo (kaylalim@heraldcorp.com)



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