LG Electronics recorded the highest sales ever in the third quarter of this year, but it was hampered by the provisions for electric vehicle battery fire recalls worth KRW 1.1 trillion.
As a result, the operating profit in the third quarter recorded an ‘earning shock’, which decreased by nearly 50% compared to the same period last year.
LG Electronics announced on the 12th that it recorded 18.78 trillion won in sales and 540.7 billion won in operating profit on a consolidated basis through announcing its tentative results for the third quarter of 2021 on the 12th. Sales are the highest in the history of the quarter.
Sales in the third quarter increased by 22.0% compared to the same period last year, and operating profit decreased by 49.6% due to the reflection of provisions for electric vehicle battery fires. Compared to the second quarter of this year, sales increased 9.8% and operating profit fell 38.4%.
LG Electronics explained that the reason for the sharp decline in profit compared to the previous year was that the profit decreased by additionally reflecting provisions related to the GM electric vehicle bolt recall.
Reuters reported that LG Electronics paid $918 million (about 1.1 trillion won) for GM’s Chevrolet Volt battery recall.
GM decided to recall an additional 73,000 Bolt EVs and Bolt EUVs produced after 2019 and sold in North America due to a car fire accident in August. The cause of the fire is presumed to be a module defect such as a battery cell or battery pack, and GM and LG are jointly investigating the cause of the fire. It was reported that LG Energy Solutions was the contracting party for the battery cell manufacturing and LG Electronics for the pack.
Prior to this, LG Electronics reflected a provision of 234.6 billion won in the second quarter (April to June). However, the recall was not resolved in 3Q, and an additional provision of KRW 480 billion was reflected. The burden is expected to increase even in the turn to black in the electric field (vehicle electric and electronic device, VS), which has been in a ‘accumulating deficit’ state for later years.
LG Electronics ended the mobile phone business at the end of July this year and is treating the MC business division’s performance as a loss from discontinued operations. Meanwhile, the interim performance is an estimate based on the Korea International Financial Reporting Standards (K-IFRS). Consolidated net income and performance by business division will be announced at the performance briefing scheduled for the end of this month.
Reporter Han Hyun-joo, Global Economics, kamsa0912@g-enews.com
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