SEOUL LG Electronics Inc (066570.KS) beat market expectations by reporting its strongest quarterly profit in nearly two years, after strong sales of its high-end television sets boosted the South Korean manufacturer's bottom line.
LG, the world's second-largest TV maker, on Tuesday said sales of large-screen TVs combined with lower material costs to yield high returns in the first quarter, and that it expects TV revenue to increase in the second quarter.
The company is battling overall weak TV demand by ramping up production of high-end products such as ultra high-definition (UHD) TVs. A lack of UHD-quality content, however, is slowing the format's adoption, analysts said.
For January-March, LG reported a 44 percent on-year rise in operating profit to 504 billion won ($486.89 million) - the highest since the second quarter of 2012 and eclipsing the 279 billion won mean estimate of 37 analysts polled by Thomson Reuters I/B/E/S.
Shares of LG Electronics, valued at $11.32 billion, were trading up 3.2 percent after the earnings announcement, versus a 0.3 percent in the wider market .KS11, following the stronger-than-expected earnings.
LG's TV division logged profit of 240 billion won, compared with a 11 billion won a year earlier, as a decline in panel prices and reduced marketing needs during a seasonally weak period kept costs down.
"Revenues (for the television business) are expected to increase in the second quarter with new model launches," the company said in a statement.
LG's mobile division ran an operating loss of 9 billion won, compared with a 133 billion won profit a year earlier, even as smartphone shipments grew by an annual 19 percent to 12.3 million units.
The company cited weaker domestic market conditions and continued decline in prices as reasons for the loss.
LG is widely expected to release the latest version of its flagship G smartphone series around the middle of the year, in its quest to mount a serious challenge to Apple Inc's (AAPL.O) iPhone and Samsung Electronic Co Ltd's (005930.KS) Galaxy line.
The company said new product launches will help boost second-quarter revenue from the mobile phones business.
($1 = 1035.1500 Korean Won)
(Reporting by Se Young Lee; Editing by Christopher Cushing)