LG Electronics Inc topped forecasts with a doubling in its quarterly net profit on Wednesday, powered by its flat-screen operations, but it grappled with sliding margins on phones.
A blurry outlook and a worse-than-expected operating profit excluding foreign exchange gains sent LG shares down 0.5 percent, wiping out an earlier 2.4 percent gain.
The strong won currency, which has gained 7 percent against the dollar so far this year, is decreasing payments on LG's foreign currency debt but is pinching its exports earnings. The company derives 75 percent of its sales from exports.
Handset margins are expected to recover slightly in the current quarter on rising sales of higher-end models to North America and Europe.
LG earned 160.4 billion won ($169.4 million) in net profit in the quarter ended March 31, up from 83.2 billion a year ago.
The result beat a 138 billion won profit forecast by 10 analysts polled by Reuters. LG said that exchange rate gains linked to its foreign currency debt helped boost net profit. Operating profit came in at 190.6 billion won, lower than the consensus forecast of 208 billion.
LG, which ranks behind Nokia, Motorola Inc and Samsung Electronics in mobile phones, posted a 0.4 percent operating loss margin at its handset division, a stark contrast from the 8.1 percent fourth-quarter profit margin. It sold 15.6 million handsets, up from 11 million a year ago, but down from 16.2 million in the October-December quarter.
LG blamed the negative margin on a decline in overall sales, a bad product mix, increased marketing costs and a change in accounting rules that forced the company to more aggressively write off its mobile phone inventory.
LG was helped by a recovery at its 38-percent owned liquid crystal display joint (LCD) venture with Philips Electronics, LG.Philips LCD Co Ltd.
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