LG Electronics held onto the first place in operating profit ratio in first quarter when compared to other major global home appliance manufacturers. LG Electronics, which took the first place for the first time last year, was able to widen the difference from Whirlpool, Electrolux and others in first quarter by focusing on premium products and strengthening its competitive edge in production cost.
After analyzing performance of global home appliance manufacturers in first quarter, LG Electronics held onto the first place in operating profit ratio by having operating profit ratio of 11.2% while Whirlpool and Electrolux had 5.5% and 5.3% respectively.
Part that needs to be noticed is that LG Electronics’ operating profit ratio is the only one that increased by double figures when its competitors’ operating profits fell compared to last year.
LG Electronics took first place in operating profit ratio for the first time last year by beating out Whirlpool and Electrolux. Operating profit ratios of LG Electronics, Whirlpool, and Electrolux in 2016 were 7.7%, 6.5%, and 5.2% respectively. Although Samsung Electronics’ CE (Consumer Electronics) sector recorded 5.9%, it was hard to directly compare Samsung Electronics’ CE sector to other businesses since it also includes TV business.
LG Electronics’ operating profit ratio in this first quarter was almost 3.5% higher than last year. Compared to how Whirlpool’s operating profit ratio decreased by 1% and operating profit ratio of Electrolux increased by 0.1%, it is a huge difference. Samsung Electronics’ CE sector’s operating profit ratio in this first quarter was 3.7% which is 2.2% decrease from last year.
LG Electronics’ sales from its home appliance business is also growing. LG Electronics’ sales in first quarter was $4.08 billion (4.6387 trillion KRW) and this is more than how much it made in first quarter of last year ($3.71 billion (4.2195 trillion KRW)) and fourth quarter of last year ($3.55 billion (4.0433 trillion KRW)).

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<LG Electronics’ ultra-premium brand called ‘LG Signature’>

Reason why LG Electronics is making such performance is due to popularity of its premium products such as TWINWash, dryer, Styler, and Signature Kitchen Sweet. This is so called ‘magic of Jo Sung-jin’.
Fact that its ultra-premium brand ‘LG Signature’ has solidified its premium image also helped its performance. Also fact that LG Electronics has expanded its component business such as motor and compressor and strengthened B2B markets such as system air conditioners also helped increase its profit ratio.
Fact that LG Electronics was able to strengthen its competitive edge in production cost through modularization of major components and efficient platforms of major home appliance products that are led by Vice-Chairman Cho Sung-jin who used to be the director for H&A (Home Appliance & Air Solution) business sector until last year is an important part that needs to be paid attention. Vice-Chairman Cho is also pushing to make platforms of Smartphone business efficient this year.
“This is the first time when LG Electronics’ H&A Headquarters recorded double figures in operating profit ratio.” said Park Won-jae who is a researcher for Mirae Asset Daewoo. “Its operating profit ratio increased in spite of increase in prices of raw materials due to increase in percentage of high-priced products and value of its brand.”
It is likely that this trend will continue for LG Electronics’ home appliance business because sales of premium products are better than expected and LG Electronics is increasing values of its products by applying high-tech technologies such as IoT (Internet of Things) and AI (Artificial Intelligence). Going after B2B markets is also a positive element in increasing its profitability.
“It is believed that LG Electronics’ position in markets for refrigerators, washing machines, and air conditioners has become unyielding.” said Kim Min-ho who is a researcher for BNK Investment & Securities Co., Ltd. “It is predicted that LG Electronics will be able to increase sales of its premium products in short-term and enter B2B markets in long-term.”
Staff Reporter Kwon, Keonho | wingh1@etnews.com

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<■Current performance of major global home appliance manufacturers ▲LG Electronics ∆Sales in 2015: $14.632 billion ∆Sales in 2016: $15.155 billion ∆Sales in first quarter of 2017: $4.082 billion ∆Operating profit in 2015: $869 million ∆Operating profit in 2016: $1.173 billion ∆Operating profit in first quarter of 2017: $458 million ∆Operating profit ratio in 2015: 5.9% ∆Operating profit ratio in 2016: 7.7% ∆Operating profit in first quarter of 2017: 11.2% ▲Whirlpool ∆Sales in 2015: $20.891 billion ∆Sales in 2016: $20.718 billion ∆Sales in first quarter of 2017: $4.786 billion ∆Operating profit in 2015: $1.285 billion ∆Operating profit in 2016: $1.354 billion ∆Operating profit in first quarter of 2017: $264 million ∆Operating profit ratio in 2015: 6.2% ∆Operating profit ratio in 2016: 6.5% ∆Operating profit in first quarter of 2017: 6.6% ▲Electrolux ∆Sales in 2015: $14.652 billion ∆Sales in 2016: $13.810 billion ∆Sales in first quarter of 2017: $3.267 billion ∆Operating profit in 2015: $325 million ∆Operating profit in 2016: $716 million ∆Operating profit in first quarter of 2017: $174 million ∆Operating profit ratio in 2015: 2.2% ∆Operating profit ratio in 2016: 5.2% ∆Operating profit in first quarter of 2017: 5.3% Reference: Collection of information from industries>