Even the fast-rising prices of raw materials and the strong won of this year could not chip away at the stellar bottom line of LG Electronics, Korea’s biggest home appliance maker. LG is now the world’s third-largest household appliance producer by annual sales, trailing Whirlpool of the United States and Sweden’s Electrolux.
As far as profitability is concerned, however, the Seoul-based LG stands out _ the digital appliance division of the firm chalked up 3.41 trillion won in sales in the first half of this year and 309 billion won in operating profit.
The operating profit rate of 9.8 percent is comparable with the global business bellwether Whirlpool, which recorded a profit rate of just 5.6 percent in the first three months of this year.
The appliance business of Samsung Electronics, LG’s cross-city rival, was even stuck in deficit this year, netting an operating loss of 21 billion won in the Jan.-June period.
“It is a tall task to maintain an operating profit of up to 10 percent in the thin-margin home appliance market crowded by high-profile competitors,” LG Vice President Huh Sung said.
Indeed, the profit rate of LG digital appliance business is at the highest level of world rankings _ 8.8 percent in 2003, 7.2 percent in 2004 and 8.1 percent last year.
Huh said LG will by no means rest on its laurels and will strive to further increase their company’s profitability by rolling out premium products that will dominate the global market.
“We aim to double the world’s top products from the current three _ home air conditioners, canister vacuum cleaners and microwave ovens _ to more than six by 2010,” Huh said.
“We hope to nudge past our rivals in such fields as system air conditioners, front-loading washing machines and side-by-side refrigerators to name a few,” Huh added.
Super-Fast Growth
On top of the impressive operating profit, LG has more to boast of _ it has been the runaway leader in year-on-year growth rates over the past several years.
The global digital appliance units of LG have maintained double-digit growth while its bigger rivals were struggling in the single-digit territory.
It is an outstanding feat because white goods were once regarded as a headache for LG with the money-losing unit having eclipsed the firm’s overall profitability.
However, broad-based innovation spawned a dramatic turnaround after Vice Chairman Kim Ssang-su, an LG lifer, took the reins of the company in late 2003.
Under the stewardship of the engineer-turned-chief executive, LG racked up impressive growth every year in the digital appliance division _ 43.5 percent overall since 2003.
The turnover amounted to a mere $6.9 billion in 2003 but the figure skyrocketed to $8.5 billion in 2004 and almost touched the $10 billion mark last year at $9.9 billion.
Only Whirlpool and Electrolux are members of the $10-billion sales club among home appliance producers. The revenue of the former stood at $14.3 billion last year while that of the latter was $12.6 billion.
LG seeks to gain membership of the exclusive $10-billion fraternity this year by reaching $12 billion in annual sales and is jockeying to top $14 billion in 2007.
Vice President Huh said LG will forge ahead with the bold target on the back of two pillars _ the outfit’s technical prowess and the loyalty of its workers.
“We are committed to catching up with global business leaders by manufacturing a glittering array of premium products based on our technical edge,” Huh said.
“It is certainly a tough job, but we think we will be able to achieve the target with our employees’ relentless passion to do so,” Huh said.
Top Refrigerator Maker
One of the products, which LG set its eyes on as a next-generation growth engine, is refrigerators for which demands are huge.
In other words, LG hopes to duplicate its success in the domestic refrigerator market in the global area to become a frontrunner in the world market by 2010 through attacking top-end demands.
LG President Lee Young-ha disclosed the ambitious scheme at a press conference at the company’s Changwon factory in South Kyongsang Province in March.
“We are determined to become the foremost player in the global refrigerator market in 2010 by outpacing Whirlpool and Electrolux,” Lee said at the time.
Last year, Whirlpool topped the world refrigerator podium with a $3.5 billion turnover, followed by Electrolux with $2.8 billion.
LG came in third with $2.6 billion in sales but Lee said the gap is not astronomical, and LG’s seamless technical innovations would help quickly eclipse the difference.
“The global refrigerator market is nearly saturated but we are confident of achieving double-digit growth in coming years on the strength of our premium lineup,” Lee said.
“In particular, our three-door bottom-mount freezer will be a big hit in advanced countries as will our side-by-side models,” he added.
By 2010, Lee predicted feature-rich side-by-side items will account for 55 percent of LG’s refrigerators, substantially higher than last year’s 41 percent.
“To attain out goal, we are to launch an onslaught on the global high-end market with the introduction of top-tier merchandise this year,” Lee said.
Included in the top-of-the-line refrigerators, which debuted this year in the United States, is one armed with a four-inch liquid crystal display.
The flat panel provides a five-day weather forecast based on the information offered by satellites.
Its side-by-side refrigerator, which was introduced to the U.S. in May with the title of Space Dios, swept away the prejudice that refrigerators must be white.
With a selection of roughly 10 colors in addition to its top features such as a uniquely positioned ice-maker, it has become one of the most sought-after fridges on the market.
From The Korean Times
