LG Group expected to pull off a recovery, helped by improvement in the IT sector


Korea’s major conglomerates grappled with worsening business conditions last year and LG Group suffered the most in terms of combined earnings, data showed Sunday.

On the flip side of the dismal earnings coin, though, is that LG is widely expected to stage a recovery this year, thanks partly to the lower base in comparison and improving market position in key product categories.

Based on the earnings reports filed under the International Financial Reporting Standards, the data of the Financial Supervisory Service and FnGuide, a financial information site, showed LG Group’s nine subsidiaries posted a combined net profit of 2.7 trillion won ($2.3 billion) in 2011, down 64.2 percent from a year earlier. Their operating profit also fell 40.1 percent to 4.5 trillion won.

LG’s flagship unit, LG Electronics, posted a net loss of 432 billion won last year. Other affiliates such as LG Display and LG Innotek struggled with net losses. Only LG Household & Healthcare bucked the trend with increased profit of 271 billion won.

Hanjin Group, which runs Korean Airline and Hanjin Shipping, posted a net loss of 922.1 billion won last year, compared with a profit of 771.1 billion won in 2010.

Hyundai Motor Group, which has eight listed units, posted a net profit of 16.9 trillion won last year, up 9.5 percent from 2010, a solid performance that brought itself closer to Samsung Group.

Samsung’s 12 affiliates saw their 2011 net profit decline 17.8 percent to 17.3 trillion won. The net income gap between Samsung and Hyundai shrank dramatically to 384.6 billion won last year, down from 5.6 trillion won in 2010,

As far as operating profit was concerned, Hyundai’s income grew 3.8 percent to 17.5 trillion won last year, while Samsung’s went down 9.9 percent to 20.5 trillion won.

Fueled by the higher earnings, Hyundai Motor Group’s market capitalization sprinted 16 percent to 127 trillion won, marking the highest growth among the top 10 conglomerates. Analysts said Hyundai benefited from strong overseas demand last year as the earthquake that shook up the manufacturing and distribution channels of Japanese carmakers already hit by the rising value of the yen against the greenback.

While POSCO Group saw its operating profit and net income down 1.7 percent and 8.0 percent, respectively, SK Group managed to post 14 trillion won in operating profit, up 45.5 percent from a year earlier.

Stronger sales in automotive, chemical and refinery fields helped Hyundai and SK groups, while other conglomerates rushed to handle a slew of negative developments such as greater concerns about the global economic slowdown and the eurozone debt woes.

For this year, LG Group is trying to regain its lost ground, with LG Electronics and LG Display hoping to improve their earnings in connection with an expected recovery in the technology sector.

Local brokerages projected LG Electronics would post an operating income of 1.02 trillion won this year, up from 280 billion won in 2011. LG Display, which suffered an operating loss of 924 billion won, is forecast to swing to an operating profit of as much as 582 billion own.

By Yang Sung-jin (insight@heraldcorp.com)