Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LG Electronics Inc (FRA:LGLG, Financial) reported year-over-year revenue growth in Q3 2024, driven by increased appliance sales in emerging markets and a rise in OLED TV sales.
- The company has set ambitious mid- to long-term goals, including achieving a 7% average annual growth rate and a sevenfold increase in EV EBITDA multiple by 2030.
- LG Electronics Inc (FRA:LGLG) is focusing on expanding its platform into services and B2B businesses, aiming to increase their contribution to 52% of total revenue by 2030.
- The company has introduced a minimum dividend of KRW1,000 per common share per year, along with a semiannual dividend scheme, enhancing shareholder returns.
- LG Electronics Inc (FRA:LGLG) has been recognized for its eco-friendly products, receiving multiple awards for energy efficiency and sustainability.
Negative Points
- Operating profit declined in Q3 2024 due to rising logistics costs, LCD panel prices, and fixed costs associated with delayed EV component sales.
- The business environment remains challenging with ongoing global macroeconomic uncertainties and geopolitical tensions affecting market demand.
- The company's cash flow from investment activities was negative KRW754.1 billion, resulting in a net cash flow of negative KRW727.5 billion for Q3 2024.
- The vehicle component solutions business experienced a decrease in operating profit year over year, impacted by reduced sales and increased R&D costs.
- The business solutions segment faced a deeper deficit due to competition-triggered drops in average selling prices and rising logistics and material costs.
Q & A Highlights
Q: Can you share some schedule or plans regarding the corporate value-up program and measures LG is taking in response to increased competition from Chinese brands in the HE business?
A: We announced our corporate value-up program on October 22, aiming for a 10% ROE by 2027 and achieving KRW100 trillion in sales by 2030. We plan to focus on platform, B2B, and new business discovery, aiming for 52% revenue and 76% operating profit from these areas by 2030. We are also reviewing quarterly dividends and buyback strategies. In the HE business, we are focusing on premium products like OLED and QNED TVs to compete with Chinese brands, enhancing cost competitiveness, and expanding our webOS platform.
Q: What is the impact of logistic costs and marketing expenses on LG's profit and loss, and what are the investment plans for new business areas?
A: Logistics costs impacted Q3 profit due to geopolitical issues, but we expect a decline in sea freight charges in Q4. Marketing expenses increased, and we plan to strategically allocate resources to boost sales. For new business investments, particularly in EVs and robots, we are expanding production lines and investing in growth areas like EV charging and robotics, aiming for significant revenue growth in the mid- to long-term.
Q: Can you share the sales portion of HVAC within the H&A business and the current status of order backlog in the VS business?
A: HVAC contributes over 25% to the H&A business, with B2C accounting for 45% and B2B for 55%. We expect revenue growth in 2025 despite market challenges. In the VS business, we have secured an order backlog worth KRW100 trillion, with in-vehicle infotainment making up 60%, EV components 25%, and automotive lighting 15%. We anticipate continued growth in order backlog into 2025.
Q: What is the current status and growth outlook for LG's subscription business, and how is the VS business responding to the slowdown in EV demand?
A: Our subscription business has grown over 50% year-over-year, contributing over 20% to revenue with double-digit operating profit. We are expanding into Asian markets like Taiwan and Thailand. In the VS business, despite short-term demand slowdown, we see strong mid- to long-term electrification trends. We are focusing on hybrid vehicles and in-vehicle infotainment systems to maintain growth and profitability.
Q: What are LG's strategies for achieving the 10% ROE target, and how is the webOS business positioned in North America and other regions?
A: We are accelerating the transition to high value-added businesses and exploring equity management plans to enhance efficiency. In the webOS business, North America holds 80% market share, and we aim to expand in Europe and South America by 2030, despite uncertainties in the advertisement business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
