LG Elec posts strong Q2 profit on handsets, LCD

LG Electronics Inc increased quarterly earnings by 84% with strong results in mobile phones and at its LCD joint venture, but the South Korean firm faces a tougher second half amid a global economic downturn.
LG, whose profits were below analysts' forecasts, predicted revenues would dip in the third quarter, citing weak seasonal demand for appliances and the impact of the global slowdown.
"There are several risks in the second half of the year to 2009, which are the global downturn of the mobile phone market and the weakening display market due to a supply glut," said Jason Kang, analyst at Daewoo Securities.
"Whether LG can maintain the high margins it is seeing now for mobile phones is the big question for the latter half of the year."
LG said it expected mobile phone margins to fall in the third quarter, although they should remain above 10%. Second-quarter operating profit margin in handsets was 14.4% on a global basis, better than 13.9% in the first.
LG, which owns 38% of LG Display Co Ltd, benefited from another banner quarter at the world's No.2 liquid crystal display maker, which on June 9 posted a quarterly net profit that more than trebled from a year ago.
"LG Electronics is the largest shareholder in LG Display, and a gloomy outlook for the display industry is making prospects much weaker," said John Park, an analyst at Daishin Securities.
LG posted April-June net profit of 707 bln won ($696.5 mln) versus 385 bln won a year ago, but missed a forecast for 802 bln won by 10 analysts surveyed by Reuters.
But operating profit on a global basis climbed to 856 bln won from 464 bln won, slightly beating expectations. Quarterly revenue on a global basis rose 22% to 12.7 trillion won.
Shares in LG, valued at about $16.35 bln, closed up 4.1% at 113,500 won after climbing as much as 6.9% before the earnings announcement, outpacing the wider market's 3.5% gain.