LG Electronics recorded results that matched the consensus forecast of analysts due to favorable exchange rate effects and better-than-expected performance from its Home Appliance & Air Solution (H&A) and Home Entertainment (HE) divisions in the first quarter of this year. In particular, sales reached a record high for the first quarter, outperforming expectations despite weak global demand.
However, LG Electronics' 'trial' is expected to begin in earnest from the second quarter. In the first quarter, the pull-in demand before the price increase due to U.S. tariffs helped the performance, but analysts noted that LG Electronics' ability to respond to tariffs introduced by Trump will be tested from the second quarter.
◇Record-high sales in the first quarter... the pull-in effect before the tariff barrier
LG Electronics announced on the 7th that it recorded an operating profit of 1.259 trillion won in the first quarter. This represents a decrease of 5.7% compared to the same period last year. During the same period, sales reached 22.7447 trillion won, an increase of 7.8% year-on-year.
Looking solely at first-quarter sales, a record-high performance was achieved, surpassing the previous record of 21.0959 trillion won set in the same quarter last year. According to financial information provider FnGuide, the consensus for this period estimated sales at 22.0668 trillion won and operating profit at 1.2593 trillion won.
However, despite expectations that it would exceed the consensus, operating profit decreased slightly. Previously, many securities firms had forecast LG Electronics' operating profit for the first quarter to be in the 1.3 trillion won range. Park Sang-hyun, a research analyst at Korea Investment & Securities, analyzed that "the favorable exchange rate effect, along with the strong performance of the H&A, HE, and consolidated subsidiaries in the first quarter, was better than expected," and he projected an operating profit of 1.336 trillion won.
The slight shortfall of LG Electronics' operating profit compared to market expectations is attributed to a slowdown in electric vehicle demand and delays in realizing new business results. The logistics cost risks that had plagued last year's results have been alleviated, and the performance of premium home appliances and heating, ventilation, and air conditioning (HVAC) in the business-to-business (B2B) sector has improved, but the newly cultivated B2B business has yet to significantly contribute to overall results.
◇Intensifying Trump-era tariffs... testing LG's crisis response capability
Industry experts agree that LG Electronics' 'main game' will begin in the second quarter. There is an explanation that the second quarter's results will serve as a test to evaluate LG Electronics' ability to respond to tariffs. Park noted, "Given LG Electronics' profitability, price increases due to tariff expansions are inevitable," and he emphasized that careful pricing policies should minimize reductions in sales volumes in order to best defend the second quarter's performance.
Both Samsung Electronics and LG Electronics produce a significant amount of appliances and TVs for export to the United States from Mexico, and it is positive that products compliant with the United States-Mexico-Canada Agreement (USMCA) are exempt from tariffs.
However, increasing dependence on production in Mexico and the U.S. may result in inevitable rises in labor costs and prices compared to production costs in Asia. As a result, LG Electronics' North American business profitability is likely to deteriorate. Indeed, domestic securities firms are continuously revising down their projections for LG Electronics' second-quarter results.
Leading domestic securities firms have adjusted LG Electronics' estimated operating profit for the second quarter of this year to below 1 trillion won. This is a reduction of 6 to 7% from previous estimates. Analysts believe this reflects that some sales expected in the second quarter have already been accounted for in the first quarter's performance. An electronics industry representative emphasized, "The most important point in LG Electronics' performance this year is the second quarter," particularly noting that it is crucial for LG Electronics to generate revenue in the B2B and non-hardware services that it has been developing for a long time.