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Poor G5 sales be damned: LG expects its best second quarter since 2014

LG G5 Friends
Samsung is not the only South Korean phone maker in town that expects a strong second quarter, as fellow South Korean outfit LG expects a two-year high in operating profit, reports Reuters.

According to LG, through a regulatory filing, the company likely made 585 billion won, or $504 million, in operating profit from April to June. That represents the highest operating profit LG has seen since the second quarter of 2014, when the company made 610 billion won, or roughly $531 million.

Analysts believe most of the operating profit comes from LG’s appliances businesses, with unusually warm weather and major sporting events like the 2016 UEFA European Championship as influential factors. Furthermore, the lowering prices of display panels might have helped increase profit margins.

Unfortunately, analysts believe LG’s mobile division will remain in the red for the fifth consecutive quarter, with the G5’s relatively poor sales a contributor to the division’s struggles. LG’s mobile division is expected to have lost 94 billion won, or around $82 million, during the second quarter.

“Despite the G5’s originality, LG sold only 2.2 million units of the strategic model due to stiff competition,” said HMC Investment analyst Greg Roh.

As a result of its mobile division’s struggles, LG had the division restructured through an executive reshuffle. According to LG, the purpose of the restructuring “was intended to keep LG’s handset business running amid challenging market situations.” LG partially blamed the restructuring on the underwhelming reception of the G5.

By comparison, Samsung expects its operating profit during the second quarter to sit at $7 billion, a 17-percent increase from the second quarter of 2015 and the strongest profit showing in over two years. The company attributes the expected success to the Galaxy S7’s and Galaxy S7 Edge’s strong sales.

LG expects to release its second quarter financials in full by the end of July.

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