Samsung, LGE Profits Keep Rolling in Q2 Based on Preliminary Results

Published July 12, 2021

Samsung Electronics and LG Electronics issued preliminary Q2 2021 revenue and earnings results last week. Both companies continue to roll, with Samsung posting a 53% Y/Y increase in operating profit and LG reporting its best-ever Q2 for both revenues and operating profits. Both companies fought off headwinds from exchange rates, as the Korean won strengthened by more than 8% Y/Y during Q1.

Samsung announced preliminary Q2 2021 revenues of KRW 63T won ($56.2B) and operating profits of KRW 12.5T ($11.2B). Revenues increased 19% Y/Y but declined 4% Q/Q in KRW terms, while operating profits increased 53% Y/Y and 33% Q/Q. Both revenues and operating profits narrowly beat consensus expectations of KRW 62.2T and KRW 11.9T, respectively.

Samsung Electronics Income Statement Highlights, 1Q 2019 to 1Q 2021

Source: Samsung Electronics Financial Statements, DSCC Analysis
Source: Samsung Electronics Financial Statements, DSCC Analysis

Samsung’s announcement noted that the preliminary estimates included a one-time gain related to the display business. As in the past several years, Apple makes a payment to Samsung in Q2 for failing to meet volume requirements for OLED display panels from a deal agreed in 2016. A report from the Korea Herald estimated that Apple’s Q2 payment to Samsung amounted to $435M.

Samsung’s display business is again expected to show a significant improvement Y/Y. In Q2 2020, Samsung Display posted an operating profit of KRW 299B on revenues of KRW 6.7T. Samsung’s OLED business managed a +4.5% operating profit margin helped by an Apple payment of more than KRW 1T, while its LCD business posted an operating loss of KRW 323B for an operating margin of -27%. The OLED business benefited from higher utilization and the LCD business benefited from sharply higher LCD TV panel prices. Jefferies analyst, Jeff Kim, estimated the operating profit for Display Products to be KRW 1.2T, but the Korea Herald gave a lower figure of KRW 0.9-1.0T.

Samsung’s Consumer Electronics business is expected to post operating profits lower than its Q1 2021 result of KRW 1.1T, as slowing demand for TVs and higher panel prices cut into profits.

LG Electronics described its Q2 2021 revenues as the highest quarterly revenue in the company’s history, but LG must be using some adjusted financial numbers. LG reported Q2 2021 revenues of KRW 17.1T, compared to KRW 18.8T in Q1 2021 and KRW 12.8T in Q2 2020, an increase of 33% Y/Y but a decrease of 9% Q/Q.

LG reported a preliminary Q2 operating profit of KRW 1.1T ($1.0B), a decrease of 27% Q/Q but an increase of 122% Y/Y. The first-half operating profit of KRW 2.62T was by far the highest in the company’s history.

LG’s Q/Q and Y/Y comparisons are confounded by the company’s closure of its Mobile Communications (MC) unit. MC had revenues of KRW 1.0T in Q1 2021 and KRW 1.3T in Q2 2020, with operating losses in every quarter of the last five years. Removing MC from the prior results makes the Q2 2021 Q/Q and Y/Y numbers look higher for revenues but lower for operating profits.

LG said that MC earnings will not be reflected in the Q2 2021 earnings report and will be treated as discontinued operating losses. Details regarding each division’s business results will be released officially later this month. LG will likely report some extraordinary charges for asset impairment of the MC business, but these would not affect the company’s operating profit.

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Written by

Bob O'Brien