Samsung, LG Report Q2 Earnings In The Wake Of COVID-19
Two of the world’s most important, and powerful, AV electronics companies issued second quarter financial reports from South Korea Thursday showing difficult profit trajectories in the coronavirus pandemic, with both citing weakened results from its smartphone businesses, but otherwise nice gains from consumer electronics items like premium televisions.
Samsung Electronics was able to put a good spin on its overall results, mainly getting a lift from its integrated circuit sector, which helped buoy the company’s profit during the pandemic. The report showed a consolidated second-quarter operating profit of 8.15 trillion won ($6.8 billion), up 23.5% on-year, while revenue slipped 6% to 52.97 trillion won.
Meanwhile, intracountry rival LG Electronics said its consumer electronics sector registered record sales this year with its highest second-quarter performance to date. However, other sectors did not do as well; LG Electronics reported a 17.9% overall revenue drop and a 24.1% decline in operating profit, at 12.8 trillion won ($10.7 billion) and 495.4 billion won ($414.5 million), respectively.
Samsung’s Q2 financial reported lackluster demand for smartphones and other devices affected its performance, but credited its bottom-line results to strong demand for memory chips, seasonal home appliance sales and a one-off gain in the display business for a better-than-expected second-quarter performance. The company also helped to improve the profit picture with cuts made in marketing costs.
Samsung’s financial statement consists of consolidated performance information from its consumer electronics, information technology and mobile communications, device solutions and display panel businesses.
Samsung’s CE sector was impacted by an operating loss from subsidiary Harman’s difficult automotive electronics position, where weakened demand for car sales during the pandemic dampened OEM vehicle audio electronics, but Samsung said it expects a turnaround as consumer audio sales grow. The acquisition cost of Harman assets last year also continue to contribute to Samsung’s overall financial picture.
Samsung said going forward the consumer electronics business will seek earnings growth by focusing on premium product TV and AV electronics lines such as its QLED (quantum-dot light-emitting diode) display products and seasonal home appliance sales..
Samsung said overall demand for display panels during the global COVID-19 crisis has decreased as store closures have taken away business from not only smartphones but to some extent small and large TV displays. In the large display segment, the absence of global sports events such as the Tokyo Olympics and the Euro 2020 resulted in a decrease from TV sales expectations for the year. However, Samsung said growth in monitor sales and a one-off gain lessened the loss some.
Elsewhere, Samsung has also seen lower demand for mobile memory, which has weakened NAND flash growth. System LSI also reported lower earnings from the weakened mobile market, the company indicated.
Samsung said it expects a gradual recovery in the second half of the year, on the back of a rebound in consumer demand for its new, “innovative” flagship Galaxy Note and Fold smartphone models, and improved sales of consumer electronics products generated by the release of new video game consoles from Sony and Microsoft.
Meanwhile, LG Electronics said that despite the COVID-19 outbreak, its strategy to focus on premium home appliances, and improve cost structure yielded positive results, while the home entertainment business recorded revenue of $1.8 billion and operating profit of $94.3 million.
The company said sector revenue slid on-year from the global impact of closed retail stores, and postponed or cancelled sports seasons. The operating profit was offset by strategic reallocation of marketing costs and an improvement in production costs.
The home appliance and air solutions division, posted a 12% on-year increase for the first half, maintaining a 4-year streak of over 1.5 trillion won operating profit for the first half of year. Some of the success in the major appliance sector was related to increased attention on health during the crisis. LG markets lines of electronic closets that remove outdoor contaminants, and sanitizing steam dryers and steam dishwashers.
As for mobile electronics, LG executives vowed not to shut down the company’s handset business, despite persistent rumors that prolonged divisional losses were intensifying pressure to do so. The smartphone segment recorded a 31.1% on-quarter increase in revenue, driven by increased sales in North America and Korea, and expects a major boost in overseas markets from the strategic launch of its LG Velvet smartphone.
For its business unit, LG said the spread of remote working and online education resulted in increased sales of computers and monitors, however, disruption of the global supply chain dampened its information display and solar energy modules.
LG said global economic is expected to continue in the third quarter, but it is looking for new opportunities in the face of the adversity.
Business performance is expected to return to the previous year’s level with further innovation and cost structure adjustments, the company said. The company is also focusing on maintaining sales for its premium TV lines, including 4K and 8K OLED TVs and Nano-cell LED-LCD TVs.
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By Greg Tarr
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