LG Group's Turn Around

All 12 affiliates show profit in Q3 with net profit up 267 pct.

LG Group's Q3 performance results have improved dramatically from the previous quarter, the group said recently.
Officials of the group said IT affiliates have helped the group turn the corner during the third quarter through belt-tightening measures and structural reform.
The group, with 12 affiliates, recorded 17.27 trillion won in sales during the quarter with operating profit at 1.42 trillion won and net profit at 1.37 trillion won, up 10 percent, 267 percent and 258 percent, respectively, from the same period last year.
IT companies'shares have been sluggish in the stock market so far, but LG Electronics, and LG-Phillips LCD are expected to turn in huge profits in Q3. LG Dacom and LG Micron also appear to have an improved outlook for their Q3 performance once they reduce one-time large expense items like marketing costs.
According to the Korea Exchange, the current market value of the entire LG Group totaled 54.20 trillion won compared to 36.70 trillion won at the end of 2006, up 47 percent.
At the center of the group's resurgence are cost cutting, increased R&D staff and an effort to improve the efficiency of officers and staff, among other measures designed to boost effectiveness, securities analysts said.
What truly surprised the stock market were the rise in LG Electronics'net profit by 988 percent and the boost in LG Chemical's net profit by 254 percent. LG Electronics saw its sales jump to 6.13 trillion won in Q3, up 1.3 percent from the same period last year with 246.6 billion won in net profit.
LG-Phillips LCD, which lost 300 billion won last year, rebounded in Q3 with sales of 3.81 trillion won and net profit of 507.50 billion won. Stock market analysts said the company has been able to cut the costs of its parts and raw materials thereby boosting profitability. The company will post one of the largest operating profits ever next year at 1.86 trillion won.
LG Dacom, in the meantime, is likely to see its profit decline slightly due to rising marketing costs. Market analysts said the company's marketing expenses rose as much as 7.8 percent from the previous quarter to launch the voice Internet communication service. But its operation will improve as marketing costs are reduced and super-speed Internet cancellation rates decrease.
LG Petrochemical, which has been attracting stock market attention as one of the companies related to the China shares, will see its operating profit rise to 376.1 billion won in Q3, up 45 percent from the same period a year ago.
Share prices of LG affiliates rose sharply compared to the end of last year. LG Chemical saw its share prices jump 131 percent, LG Petrochemical 97 percent, LG Electronics 36.9 percent, LG-Phillips LCD 38.6 percent, LG Dacom 29.3 percent, LG International 29.8 percent and LG Fashion 28.3 percent.
LG Micron, a parts maker, saw its share prices drop about 23 percent due to sub par performance by its PDP section toward the end of last year, but expects to recover in Q3. Its share price is projected to reach 42,000 won per share with its IT sector expected to recover in Q3 for the first time in a year.
Meritz Securities share price projection for LG Electronis is 95,000 won, while Korea Investment Securities gave an 84,000 won per share target. Some analysts predict the share price will break 100,000 won.
An analyst with Korea Investment Securities said LG Electronics has been able to turn itself around by relocating its plants overseas and exploring European markets for its electronic products, cell phones and home appliances. nw

(right photo)Chairman Koo Bon-moo of LG Group.
The LG Twin Building in Yeouido, Seoul, which is the headquarters for LG Group.