LG Elec to boost appliance sales, profit

By Marie-France Han and Sumeet Chatterjee

SEOUL (Reuters) - LG Electronics Inc. (066570.KS: Quote, Profile, Research, Stock Buzz), the world's largest household air conditioner maker, said it was aiming to boost its appliances division's operating profit margin and sales by launching new products.

"Overall, LG's appliances business will grow by about 30 percent this year," said Soon Kwon, vice president of LG's appliances business, referring to sales.

Kwon said on Thursday at the Reuters Global Technology, Media and Telecoms Summit that he hoped revenue from LG's appliances unit would rise to $13.5 billion this year from last year's $10.7 billion.

He also said his unit was hoping to post an operating profit margin of about 7 percent in 2007 on a consolidated basis from 5.6 percent in 2006.

Sales from LG's appliances unit, which also makes washing machines, refrigerators and dishwashers, represents about 30 percent of the company's total revenue on a parent basis.

After suffering in 2006 from skyrocketing raw materials prices and a strengthening won currency, the division appears headed for a steadier performance in 2007.

"Copper prices had gone down 2 months ago, however today (they) have gone up again," said Kwon. "I think it's going to up and down for a while but will never go down to the level that we saw two years ago. That impacts a lot on our business."

LG has made significant inroads into the North American market, which represents about 23 percent of its sales. It has a growing presence in the lineups of major distributors such as Sears (SHLD.O: Quote, Profile, Research, Stock Buzz), top home supplies retailer Home Depot (HD.N: Quote, Profile, Research, Stock Buzz), top electronics vendor Best Buy (BBY.N: Quote, Profile, Research, Stock Buzz).

"We would like to place LG products in every possible store front in the United States," said Kwon, saying the company already had close to 5,000 storefronts.

Europe represents 11 percent of LG's appliances sales while the Middle East and Africa make up another 11 percent. Asia represents 15 percent of LG's sales.

To counter the negative effect of materials costs and stronger currency, LG is betting on the launch of even more popular and high-end products, said Kwon.

"There's a huge potential for us as the world economy grows and the overall income level grows," Kwon said.

In the United States, LG's appliances are priced above brands like General Electric (GE.N: Quote, Profile, Research, Stock Buzz) and Whirlpool (WHR.N: Quote, Profile, Research, Stock Buzz) and below premium names such as Viking and Sub-Zero.

Kwon said LG, which was so far focusing on consumers with annual household incomes above $75,000, was aiming to expand that base a bit downward.

At the same time, it intends to offer higher-end products that would be priced below premium brands while offering comparable functions.