LG Electronics (066570.KS) posted operating profit well above 1 trillion won for a second consecutive quarter, with first-half earnings this year already exceeding its full-year profit for 2024. Industry observers attribute this to the shift of businesses such as home appliance subscriptions and vehicle solutions (VS) toward high-margin structures. Business-to-business operations including heating, ventilation and air conditioning (HVAC) are also growing in both domestic and overseas markets, lending weight to the analysis that a profit structure once shaken by economic cycles is stabilizing. If the robotics business, a new growth engine, also gets on track, LG Electronics is expected to draw industry attention for a business structure that leads the artificial intelligence (AI) era rather than that of a simple manufacturer.
On Monday, LG Electronics announced preliminary second-quarter results, reporting consolidated revenue of 23.8297 trillion won and operating profit of 1.5788 trillion won. Both exceeded the one-month consensus estimates 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 new second-quarter records.
"High-value businesses" are cited as the background to the earnings surprise. In the home appliance solution (HS) business, a high-value 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 businesses. In the media entertainment (MS) business, stable platform revenue from advertising and content increased based on "webOS," the TV operating system (OS). In the vehicle solutions (VS) business, sales of high-value products centered on premium infotainment expanded, and profitability stabilized on the back of a high 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-soo, a researcher at Meritz Securities, said in a report that day, "The core is the solid main business rather than tariff refunds," adding, "Considering the expansion of appliance subscriptions and high-margin infotainment sales in the vehicle solutions (VS) business, the profitability of the main business is being maintained solidly."
The addition of the tariff refund effect made the earnings improvement even clearer. LG Electronics recorded as a one-time item this quarter the amount confirmed for refund among tariffs it had paid on U.S. export volumes last year. The industry estimates the refund at around 300 billion won.
An LG Electronics official said, "Even excluding the tariff refund, second-quarter operating profit rose significantly from a year earlier."
Analysts say company-wide cost efficiency efforts underpinned the operating profit remaining in the trillion-won range this quarter as well. Last year, voluntary retirement costs of about 100 billion won were reflected in the third quarter and about 300 billion won in the fourth quarter. In contrast, the voluntary retirement costs incurred in April this year are known to have amounted to only hundreds of billions of won. On top of this, cost reductions and inventory management through the company-wide emergency management system combined to further strengthen the business fundamentals.
The market is rather focusing on the AI data center cooling business and robotics as LG Electronics' next growth axes. The industry assesses the AI data center cooling system as a re-rating factor with more substance than past expectations for the Apple Car. It also projected that the robotics business would become a mid- to long-term growth engine based on the construction of a humanoid data platform.
An industry official said, "This quarter showed that LG Electronics is transforming itself into a company that can structurally generate operating profit of more than 1 trillion won, rather than a company relying on one-off boosts."
