IR News

- Export in information and communication recorded strong growth…Maintained high level of operating income despite sluggish sales from terrorist aftermath
- Recorded temporary deficit in ordinary income due to losses from sales of stake in Dacom and from valuation based on equity method
- Enjoyed high growth potential in digital sector and stable source of profit from existing business lines
- With Q4 also expected to show healthy performance, year target of 16.7 trillion won likely to be met


Despite low demand due to seasonality and worldwide economic downturn from the aftermath of terrorist attacks in the U.S., LG Electronics enjoyed healthy performance in the third quarter of the year, maintaining last quarter's growth rate.

At the investor briefing for 3Q 2001 performance held at the Korea Stock Exchange on October 30 and presided over by Senior Vice President of Finance Young-soo Kwon, LGE announced that for the third quarter this year, it recorded sales of 3.86 trillion won, operating income of 154 billion won, current income of 571.6 billion won, and net income of 417.5 billion won.

In Apple to Apple Comparison, LGE Enjoyed Better Performance
In the third quarter, LGE recorded total sales of 3.86 billion won including export of 2.4 trillion won (about US$1.9 billion) and domestic sales of 1.45 trillion won. Overall, its sales grew by 11.3% over the same period of last year. In particularly, when excluding sales of the CRT business (Q2 2001, approx. 320 billion won), which was spun off as a joint venture from July, when compared to 2Q of this year, sales was slightly lower (approx. 3.95 trillion won when excluding CRT) but exports recorded an increase.

This means that despite unfavorable market conditions including seasonal factors (substantial drop in sales of air conditioners) and global economic downturn, LGE succeeded in achieving strong growth in the export of information and communication products, monitors, optical storage products (CD-ROM, etc.), and TVs. An increase in domestic sales of Kimchi (Korean pickled cabbages) refrigerators was also recorded.

Domestic sales grew by 21.7% compared to same period last year but dropped by 9.6% compared to the previous period. This is because although sales of air conditioners fell due to seasonality, sales of Kimchi refrigerators and digital display products like X-canvas recorded growth.

Export also grew by 5.8% over the same period last year and by 2.4% over the previous period. Thanks to strong sales of its flagship products like TVs and refrigerators as well as rebound in sales of IT products and healthy export growth of information and communication products, LGE was able to overcome challenges put forward by seasonal factors and economic downturn since the U.S. terrorist attacks.

Operating Income Target Was Met Despite Unfavorable Conditions…But Current Income Recorded Temporary Deficit
As for operating income, it dropped to 154 billion won (▲21.4 %) compared to the previous period. In particular, operating income ratio maintained the 4.0% range, which is similar to the previous period (4.6%). This shows that LGE is successfully overcoming potential profit losses owing to increase in marketing cost and drop in sales price resulting from tightened competition at a time of worldwide economic slowdown.

Ordinary income, however, recorded temporary loss of 571.6 billion won due to loss in sales of Dacom shares last month (▲3,75 billion won) and loss from valuation in equity method arising from worsened performance of affiliates. But the accumulated ordinary income and actual ordinary income for the third quarter were 935.7 billion won and 459.7 billion won, respectively.

Growing as Digital Leader With High Growth Potential and Profitability
The most notable aspect in LGE's performance for the quarter was strong growth in the information and communication sector. Thanks to substantial growth in export including increased supply of CDMA handsets and systems to the U.S. market (49% growth over previous period; 153% growth over the same period last year) and despite sluggish demand in Korea, LGE was able to record 14% increase in sales over the previous period.

Export in information and communication business, in particular, exceeded sales in Korea (535.6 billion won to 506.8 billion won) and quarterly sales also surpassed the one trillion won mark - making information and communication now one of the major business areas for LGE.

By adding solid performance from digital product lines in the advent of the Digital Age and from information and communication business on top of stable growth of home appliance products which had served as the cash cow for the company, LGE is successfully transforming itself as a Digital Leader with strong foundation for continuing growth and profitability.

Sales Target for the Year Expected to be Achieved with Improvement in Market Conditions in the Fourth Quarter
Even if there is a drastic downturn in the current market environment, LGE expects to record better performance in the fourth quarter. As such, it expects to achieve the sales target for the year of 16.7 trillion won set in early January.