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LG Electronics posted operating profit well above 1 trillion won for a second consecutive quarter, exceeding its entire full-year profit from last year in the first half of this year alone. The industry attributes this to a shift toward a high-margin structure in areas such as home appliance subscriptions and the vehicle solutions (VS) business. The view is gaining traction that its earnings structure—once buffeted by economic cycles—is stabilizing, as business-to-business operations such as heating, ventilation, and air conditioning (HVAC) grow simultaneously in both domestic and overseas markets. If its new growth engine, the robotics business, also gets on track, LG Electronics is expected to draw attention for a business structure that leads the AI era rather than being a simple manufacturer.
On the 7th, LG Electronics announced through its preliminary second-quarter results that it recorded revenue of 23.8297 trillion won and operating profit of 1.5788 trillion won on a consolidated basis. Both exceeded expectations, with one-month consensus estimates (average forecasts) of 22.7949 trillion won and 1.4226 trillion won, respectively. Revenue and operating profit rose 15% and 147% from a year earlier, respectively, both setting record highs for a second quarter.
"High value-added businesses" are cited as the backdrop for LG Electronics' "earnings surprise." In the home appliance (HS) business, a high value-added two-track strategy centered on premium and volume-zone (mass consumer market) appliances took hold, while high-margin appliance subscriptions and online appliance sales expanded.
Other business divisions are also accelerating their shift to high value-added businesses. In the media and entertainment (MS) business, stable platform revenue from advertising and content grew based on "webOS," the TV operating system (OS). In the vehicle solutions (VS) business, sales of high value-added products centered on premium infotainment expanded, and profitability stabilized on the strength of a large order backlog. The HVAC (ES) business is also emerging as a growth axis. This quarter, record heat waves centered on Europe continued, boosting sales of air conditioners, heat pumps, and unitary (commercial HVAC) systems.
Yang Seung-su, a researcher at Meritz Securities, analyzed in a report that day, "The core is a solid core business rather than tariff refunds," adding, "Considering the expansion of appliance subscriptions and high-margin infotainment revenue in the vehicle solutions (VS) business, core business profitability is being maintained solidly."
Earnings improvement became even clearer with the added effect of tariff refunds. LG Electronics reflected as a one-time item this quarter the amount confirmed for refund out of tariffs it had paid on U.S. export volumes last year. The industry estimates the refund at about 300 billion won. An LG Electronics official said, "Even excluding the tariff refund, second-quarter operating profit rose sharply from a year earlier."
Analysts say company-wide cost efficiency efforts underpinned operating profit remaining in the trillion-won range again this quarter. Last year, voluntary retirement costs of about 100 billion won in the third quarter and about 300 billion won in the fourth quarter were reflected. In contrast, the cost of voluntary retirement carried out in April is known to have been only in the tens of billions of won. Coupled with cost reductions and inventory management through a company-wide emergency management system, this further strengthened the business fundamentals.
The market instead is focusing on the AI data center cooling business and robotics as LG Electronics' next growth axes. The industry views the AI data center cooling system as a re-evaluation factor with more substance than past expectations for the Apple Car. It also forecast that the robotics business will become a mid- to long-term growth engine based on building a humanoid data platform.
An industry official said, "This quarter's results show that LG Electronics is transforming its fundamentals into a company that can structurally generate operating profit of more than 1 trillion won, rather than one that relies on one-time boosts."
