LG SA saw its first half earnings from sales rise by 32% year-on-year for the first half of 2006, a trend it expects to continue despite a slowdown in consumer confidence.
For the first half of 2006, LG posted sales gains in all major consumer divisions, especially in cellphones, IT and home appliance divisions. The company says its interim sales figures showed a 107% boost in its GSM division and a 41% rise in IT sales, which culminated in a 27% increase in the general consumer range.
However, the latest Bureau for Economic Research and FNB Consumer Confidence Index indicates spending may taper off. The survey, released on 5 July, said that, while confidence was still at record levels, "higher interest rates, volatile financial markets, higher transport costs and food prices may, however, have an eroding effect on these high levels of confidence in subsequent quarters".
Despite this, LG is upbeat. MD James Tae says: "We have noted the decline, but we are not expecting it to be a trend as we believe that local consumer confidence will be sustained by SA`s rising employment rate, the recent personal tax reductions and the increased numbers of consumers entering the durable goods market."
LG, which employs over 72 000 staff in 77 subsidiaries, is also unconcerned by a decline in business confidence, as reported by the South African Chamber of Business. The Business Confidence Index`s latest pole for July showed that a downward trend, first seen in April, is continuing.
Luxury sales rise
LG, which has total revenue of more than $35 billion, believes its first half sales are an indication of a successful business model. "We are optimistic about our position in the market... The great news is that these results - and consumer buying behaviour - indicate we are getting it right," says Tae.
Revenue from sales of plasma and LCD flat panel TVs rose by more than 200% year-on-year, while home theatre audio systems and DVD recorders were also strong growth points.
LG says it saw a move by consumers to more expensive, feature-rich refrigerators, which led to a 270% increase in income from side-by-side models. In addition, an industry shift to multi-format compatible optical storage devices resulted in 267% growth in this division.
Commenting on the success of its mobile division, Tae says the company`s Chocolate phone aided it in achieving over 100% growth year-on-year. "We have set some ambitious targets for our mobile division and I have to say this has been a very exciting first half."
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