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Asian CE Financials Show Changing Market

5/08/2012 12:01:00 AM Eastern

NEW YORK — LG Electronics returned to profitability,
Samsung posted record profits while Sharp Electronics
and Yamaha reported losses.

Based on the recent financial news from Japan and
Korea, that wasn’t shocking, but what was a surprise
was that JVC Kenwood recorded its first annual profit
since the company was formed in 2008.

While we wait for Panasonic, Pioneer and Sony to
report their fiscal year results later this week, here are
what these five Asian manufacturers posted recently
which provide a glimpse of what the current condition
of CE manufacturers are in Asia:

LG Electronics rebounded to profitability in the
first quarter, reporting a net profit of $214.9 million,
following two straight quarters of net losses.

Unaudited consolidated financial results showed
consolidated revenues of $10.8 billion, with an operating
profit of $396.1 million.

LG’s home entertainment unit saw operating profit
nearly double in the quarter, year over year, to $191.9
million, on sales of $4.7 billion, which were down 6.8
percent compared with the first quarter of 2011. LG
cited the sluggish European economy as elemental
in the sales decline, but sales of richer-featured flatscreen
TVs drove profitability.

The company’s mobile communications business
saw its operating profit more than triple quarter over
quarter to $34.5 million. The gain was largely driven by
strong higher-margin smartphone sales, the company
said, though overall revenues declined 14 percent year
over year to $2.2 billion, as a result of declining feature phone sales.

LG sold 13.7 million handsets in the first quarter,
down from 17.7 million units shipped in the fourth
quarter, but the company sharpened its operating
profit margin to 1.4 percent vs. a 3.5 percent margin
loss a year earlier.

LG’s home appliance unit’s operating profit grew
48 percent from the same period last year to $134.4
million, on a 2.7 percent decrease in revenues year
over year to $2.2 billion, thanks to higher average
sales price, better product mix and cost efficiency,
the company said.

Samsung Electronics reported double-digit increases
in revenues and operating profits for the first
quarter, ended March 31. Revenues in the quarter
were 45.27 trillion Korean won on a consolidated basis,
a 22 percent increase year on year.

For the quarter, Samsung’s operating profit reached
an all-time high of 5.85 trillion won, representing a
98 percent increase year on year. Consolidated net
profit for the January through March period was 5.05
trillion won.

Samsung’s strong performance in the quarter was
driven mainly by the IT and mobile communications
segment.In particular, solid growth in the mobile
communications business, with brisk sales of flagship
Galaxy Note and Galaxy S II devices contributed
to the company’s profitability.

The consolidated operating profit for IT and
mobile communications businesses reached 4.27
trillion won on revenue of 23.22 trillion won. The
display panel business rebounded in the first
quarter with operating gains of 280 billion won,
following an uptick in demand for high-margin
panels used in tablets, 3D/ LED TVs and premium
OLED panels.

Operating profit for the display panel business
turned around from the previous quarter to register
280 billion won on revenue of 8.54 trillion won in the
first quarter.

The IT and mobile communications division registered
quarterly operating profits of 4.27 trillion won
for the first period. Revenue reached 23.22 trillion
won, and the mobile unit accounted for 18.90 trillion
won, up 86 percent year on-year.

Samsung’s consumer electronics businesses,
which encompass visual display and digital appliances,
registered an operating profit of 530 billion won in
the quarter, up 550 percent year on year, on revenues
of 10.67 trillion won.

Sharp Electronics reported a net loss and a
double-digit drop in net sales in its fiscal year, ended
March 31.

The net loss was 376 billion yen compared with the
prior year’s net income of 19.4 billion yen, and sales
were down 18.7 percent for the year to 2.46 trillion
yen.

Sharp blamed the usual culprits — the continued
strength of the yen, troubles with the Japanese and
European economies and a slowdown in China — and
lower demand for LCD TVs.

In its consumer/information products unit, sales
were down 25.6 percent to 1.06 trillion yen compared
with the prior year due to lower demand in Japan and
higher price declines, which were “slightly offset” by
large-size LCD TVs 60 inches and larger, especially
in North America.

JVC Kenwood reported lower sales and but a net
profit for its fiscal year, ended March 31, the first annual
profit since the company was formed in 2008.

Net sales were 320.7 billion yen, down 9 percent
from the prior year, and the company reported a net
profit of 6.03 billion yen compared with the prior
year’s net loss of 4.02 billion yen, its first year-on-year
net profit since JVC Kenwood was formed in October
2008.

In car electronics, sales were down 1.1 percent to
107.2 billion yen and had an operating loss of 1.5 billion
yen.

Home and mobile sales were down 22.5 percent to
77.5 billion yen, but operating profit was 1.73 billion
yen, reversing the prior year’s 835 million yen loss.

Yamaha posted a net loss of 29.4 billion yen
($366.5 million) in fiscal 2012 ending March 31, on
a 4.6 percent decline in sales to 356.6 billion yen
($4.45 billion). In fiscal 2011, the company posted a
net profit of 5.1 billion yen.

Full-year sales slipped because of the slow global
economy, historically high value of the Japanese yen
against other currencies, and musical-instrument
production delays caused by parts shortages, the
company said.

The musical instruments and AV/IT (which includes
home audio) segments posted operating incomes of
7.7 million yen and 2.87 million yen, respectively, and
semiconductors posted an operating loss of only 2.9
million yen.

Yamaha forecasts net income of 9 billion yen ($112
million) in fiscal 2013, which runs from April 2012
through March 31, 2013, on a 6 percent gain in net
sales.

Currency conversions for Yamaha were based on
$1=80.2 yen. — Additional reporting by John
Laposky and Joseph Palenchar.

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