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LG Q2 profits climb thanks to cost cutting, but mobile business flounders

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LG has posted a 28.5 percent drop in year-on-year revenues from its mobile business, but 3D TV sales in its home entertainment division prop up the overall figures.

LG Prada04_1020
LG Prada04_1020

Korean manufacturer LG Electronics has reported Q2 net profits of 159 billion won ($138 million), up 46 percent from the second quarter of last year. Attributable largely to a program of cost reductions and a shift away from low-margin products such as tablets, the jump comes amid a 10.6 percent decline in overall takings. While LG's home entertainment, appliance, and air conditioning divisions performed strongly, revenues from the company's mobile business fell 28.5 percent year-on-year.

Revenues from mobile fell 28.5 percent year-on-year

LG Mobile Communications Company made a 57 billion won ($49 million) operating loss in the second quarter, which the company attributes to marketing expenses for devices such as the Optimus 4X HD. Reuters notes that LG has been squeezed from both ends of the mobile market in recent months, with Chinese manufacturers ZTE and Huawei putting pressure on the low end and the premium segment proving difficult to crack. LG's mobile division reported a 22 percent increase in smartphone shipments as a proportion of overall sales, but much of this can be attributed to a decline in demand for its lower-end featurephones.

LG Home Entertainment Company has posted far more positive results — while overall sales declined 5.8 percent year-on-year, Q2 operating profit more than doubled to 216 billion won ($188 million). The company's Cinema 3D TVs performed particularly well, and LG stresses that it will continue to "aggressively promote" the technology to drive further sales. It expects general demand for TVs to increase into next year, due partly to growing sales in the developing world. Whether this will be enough to jumpstart overall revenue growth in the coming quarters remains to be seen.