LG has reported a 99% crash in profits due to falling phone and consumer electronic sales. In Australia 2010 has been a horror year for LG who have undergone a massive management shakeup, after they were exposed for the third time selling “shonky” products.
Earlier this week Choice Australia gave them a “Shonky” gong in their annual awards as the company moved to bed in a new management team following the mass dumping of their CEO, Sales Director, Marketing Director and several product managers.
Last night LG Electronics said that their third-quarter net profit plunged 99.2% from a year earlier to $6.7 Billion.
Attempts by ChannelNews to get a local update on their performance have been refused by both their PR company and the company’s new Marketing Director Nick Gibson and CEO William Cho who have been employed in an effort to turn the local subsidiary’s woes around.
Earlier this month the Seven Network questioned how LG Australia had managed to avoid multimillion dollar fines after being exposed for selling refrigerators with false energy labels.
Last night Chief Financial Officer David Jung, warned that the ongoing global economic slowdown is hurting overall consumer demand for electronics devices worldwide including Australia.
“The (global) fourth-quarter demand still seems uncertain,” said Jung at an investor relations session. “The fourth-quarter is a typically high selling season for handsets and televisions while flat panel prices are expected to stabilise. But the fall in TV prices is likely to persist amid the global economic weakness and toughening rivalry in major product segments.”
Hurting LG, the world’s third-largest mobile phone maker by shipments after Nokia and Samsung, is a 32% decline in third-quarter sales of their mobile phones. In Australia the sales decline is over 50% with the company struggling up against a surging HTC and Apple.
“LG is targeting to sell as much as 3 million Optimus One smartphones globally by the end of this year…and we expect the handset division to see a strong recovery at least from the first quarter,” Jung said.
Analysts expect LG to continue reporting operating losses until the first quarter of next year due to its high spending on marketing and research and development, and steeply reduced selling prices of its mobile phones which are being discounted in several markets including Australia.
“In particular, we look for a considerable operating loss in the fourth quarter of 2010, due mainly to rapidly increasing costs in handsets, a fall in the global TV demand and an intensifying price competition in home appliances,” said Nomura in a recent report.
“We believe LG Electronics is unlikely to recover its business momentum until the second-quarter of 2011, despite its efforts, including a change in management.”.
Sales from LG’s home entertainment division, which makes flat-screen TVs and plasma display panels and accounts for nearly 40% of the company’s total revenue, rose 9% however operating profit fell due to rampant discounting.