LG Electronics Forecasts Over 46% Drop in Q2 Operating Profit Due to Rising Costs

According to a report by Yonhap News Agency, LG Electronics Inc. announced on July 7 that its operating profit for the second quarter is expected to decline by more than 46% compared to the same period last year, primarily due to rising logistics and tariff costs. In a regulatory filing, LG Electronics estimated that its revenue for the last quarter would decrease by 4.4% to 20.74 trillion won, with an operating profit of approximately 639.1 billion won (about $467.2 million), marking a steep decline of 46.6% year-over-year. However, the company did not disclose its net profit expectations. Reports indicate that LG's operating profit fell short of average expectations by 15.2%. The company attributed the decline in operating profit to ongoing adverse business conditions in the second quarter, particularly the impact of changes in U.S. trade policies. Factors such as rising tariff costs on steel and aluminum, increased logistics expenses, and intensified market competition were identified as primary reasons for the decreased profitability. Despite these challenges, LG's B2B sector, including automotive solutions, subscription services, and heating, ventilation, and air conditioning (HVAC) systems, showed robust growth in the last quarter. Notably, the growth in automotive solutions revenue and improved operational efficiency contributed to a year-over-year increase in operating profit. Moving forward, LG Electronics plans to drive sales of high-end in-car infotainment systems and diversify its business through new products such as automotive content platforms. In contrast, demand for its core home appliance business has declined due to geopolitical risks in the Middle East. In the second half of this year, LG will focus on strengthening its business foundation, prioritizing areas that can bring 'qualitative improvements,' expanding high-profit, stable growth sectors like automotive solutions and HVAC, developing non-hardware businesses like webOS platform services and subscription models, and enhancing direct-to-consumer (D2C) sales through LGE.COM. According to the company's forecast, logistics costs are expected to decrease in the second half of the year.