LG ponders home appliance deals to speed up global expansion

[SEOUL] LG Electronics Inc, with businesses spanning TVs to washing machines, is looking at home appliance acquisitions to fuel its global expansion and withstand a slowing smartphone market.

The company will probably focus on business-to-business targets, such as component makers, Jo Seong-Jin, president of LG's home appliance division, said in an interview. Earnings from the business will increase in the quarters ahead, Mr Jo said, as he expects the unit's sales to rise about 10 per cent this year. LG shares climbed 4.1 per cent Monday, the most in almost a month. The KOSPI gained 1.4 per cent in Seoul.

LG, like larger rival Samsung Electronics Co, is trying to innovate and push into premium segments to capture more affluent consumers amid increased competition from Chinese rivals including Midea Group Co and and Haier Electronics Group Co. LG released its Twin Wash machine in July last year, enabling users to do two loads of laundry at the same time.

"The home appliance industry growth, including washers and refrigerators, is unlikely to show a significant expansion going forward," Mr Jo said. "The overall home appliance market is expected to grow about 2.5 to 3 per cent by sales this year whereas our sales for premium sets alone will generate a whopping 10 to 15 per cent growth." Seoul-based LG is considering an expansion of its production footprint, which already includes plants in 11 countries from South Korea and China to Turkey and Mexico. The company may increase its investment in Vietnam and hasn't ruled out establishing factories elsewhere in North America as well as Brazil and South Africa, Jo said.

LG posted operating profit of 505.2 billion won (US$431 million) on sales of 13.4 trillion won in the three months ended March, the company said in April. Home appliance earnings surged 78 per cent to 407.8 billion won in the quarter.

Midea, China's biggest maker of home appliances, agreed in March to buy a majority stake in Toshiba Corp's appliance unit. Haier agreed in January to buy General Electric Co's appliance division for US$5.4 billion.

BLOOMBERG