LG Electronics has almost doubled its quarterly profits, beating forecasts, powered by stronger mobile phone sales and gains from its flat-screen joint venture.
Shares in LG leapt 3.7 percent as the world’s fourth-biggest mobile phone maker was also expected to post strong earnings growth this year led by an improving trend for handset sales and booming demand for flat screen televisions.
However, risks from a soaring local won currency are clouding the outlook for LG, which derives nearly 80 percent of its revenue from abroad, analysts said.”The handset business looks promising because its operating profit margin has been improving and 3G phone sales are doing well,” said Lee Yong-zik, a fund manager at Prudential Asset Management.
“But falling prices of digital TVs and monitor prices are a factor behind our cautiousness.” LG, also the world’s top air conditioner maker, posted a 312.2 billion won ($318.1 million) net profit in the quarter ended December 31, against 163.4 billion earned a year ago. The result was higher than an 181.9 billion won profit forecast by seven analysts polled by Reuters.
Sales fell 5.2 percent to 6.18 trillion won from a year earlier, as LG shifted more production to overseas units and due to the higher won, which cut the value of its sales in dollars.LG is expected to post a 1.09 trillion won net profit in 2006, up 55 percent from 702.8 billion in 2005, according to Reuters Estimates.
The firm is also likely to suffer a seasonal slowdown in handset sales and higher marketing costs in the first quarter, before a broader recovery later in 2006, analysts said.LG shares jumped 3.73 percent to end at 80,700 won, outpacing the wider market’s <.KS11> 2.27 percent gain. The stock soared 28 percent in the fourth quarter, more than double the broader market’s 13 percent gain.
The won rose 2.9 percent on the dollar in the fourth quarter and has risen a further 3.7 percent so far this year.