LG Electronics Posts $487 Million Loss - InformationWeek

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1/22/2009
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LG Electronics Posts $487 Million Loss

Sluggish demand, declining margins, and a price-fixing fine led to a $489 million loss for the cell phone and consumer electronics maker.

LG Electronics on Thursday posted its first quarterly loss in seven quarters, and the consumer electronics company is predicting a tough couple of business months.

Due to shrinking demand for flat screens and a shrinking margin for mobile phones, the company posted a net loss of about $487 million for the fourth quarter despite a 12.2% increase in sales. LG had a net profit of about $453 million for the same period last year.

Like rival electronics companies, LG is feeling the effects of the global economic slowdown, and it expects demand and profitability to decline in 2009.

"Global demand is slowing amid intensified competition among rival electronics makers," LG said in a statement. "We'll tighten capital spending this year in the face of worsening economic conditions."

The mobile division was a mixed bag for LG, as the division had increased sales but declining margins. Handsets like the Renoir and the Cookie led to an 8% increase in shipments of mobile phones, to 25.7 million. For 2008, LG shipped a company-record 100.7 million units, and it become the third-largest cell phone manufacturer in the world, behind only Nokia and Samsung.

But the mobile division saw its operating profit margin dip to 5.2% because of increased marketing to minimize year-end inventory, LG said. The company said it expected "negative growth" in the handset market for 2009, which is in line with other predictions.

The digital display division had sales increase 16.4% to about $3.4 billion, but the division had an operating loss of $10 million because of slowing demand and lower prices. The loss also included a $400 million fine imposed by the U.S. Department of Justice for a price-fixing conspiracy of liquid crystal displays.

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