LG 2002 Annual Report Download - page 22

the Mobile Handset Division were the main contributors to the Company’s overall profitability improvement.
Operating profit margin improved to 5.5% in 2002 compared to 4.8% in the previous year. Recurring profit
also recorded a 17.7% increase to reach 675.2 billion won in 2002. Recurring profit margin, however, edged
up only slightly to 3.6% compared to 3.5% in 2001.
Sales
The Company’s total revenue grew 16.9% YoY to 18.60 trillion won in 2002. Exports, with a 21.0% increase,
led the growth while domestic sales increased 10.2%. Consequently, the contribution of exports to total sales
(excluding CRT sales) increased from 62.1% in 2001 to 64.2% in 2002. The main contributor to soaring
exports was a 59.8% increase in mobile handset shipments, especially to North America and China. As a
result, exports of mobile handsets accounted for one fifth of the Company’s total exports and are expected to
continue to rise in the foreseeable future. Domestic sales, meanwhile, increased 10.2% over the previous year
on the back of strong demand for home appliances and mobile handsets. Accordingly, in 2002 the Digital
Appliance Division and the Mobile Handset Division posted 32.7% growth and 24.2% growth respectively.
However, the Telecommunication System Division experienced a drop of 45.5% in domestic sales, mostly
affected by withdrawal from non-profitable businesses and a decrease in capital expenditure by
telecommunication operators.
Sales by Division
Digital Appliance Domestic Sales 2,210 2,933 2,273 32.7
Exports 2,753 3,109 2,084 12.9
Sub Total 4,963 6,042 4,357 21.7
Digital Domestic Sales 1,475 1,743 1,279 18.1
Display & Media Exports 5,305 6,200 4,652 16.9
Sub Total 6,780 7,943 5,931 17.2
Mobile Handset Domestic Sales 942 1,170 868 24.2
Exports 1,473 2,354 1,873 59.8
Sub Total 2,415 3,524 2,741 45.9
Telecommunication Domestic Sales 1,203 655 529 -45.5
System Exports 292 249 212 -14.8
Sub Total 1,495 904 741 -39.5
Others Domestic Sales 207 154 106 -25.6
Exports 51 36 29 -30.7
Sub Total 258 190 135 -26.6
Total Domestic Sales 6,037 6,655 5,055 10.2
Exports 9,874 11,948 8,850 21.0
Total 15,911 18,603 13,905 16.9
2001 2002 Change(%)
January-December Pro forma April-December
LG Electronics Inc. IAnnual Report 2002 I40 41
(Billions of Korean Won)
16.9%
(Billions of Korean Won)
Sales
9,874
15,911
11,948
18,603
13,905
01 02 02
Digital Appliance
Digital Display & Media
Mobile Handset
Telecommunication System
Others
1
5
19
43
32
Sales Breakdown
(%)
6,655
8,850
5,055
6,037
Domestic Sales
Exports
April-December
* Change % is year-on-year basis.
* CRT business was spun off in the second half of 2001 and its sales were excluded in 2001.
> Digital Appliance
The Division’s main products are white goods such as air-conditioners and refrigerators, which in total
recorded 21.7% growth in 2002. The performance strengthened the Company’s top-tier position in the global
industry, which has shown 3% to 4% annual growth for the last couple of years. The Division’s revenue
reached 6.04 trillion won, representing 32.5% of the Company’s total revenue. Domestic sales surged 32.7%
to 2.93 trillion won, boosted by strong demand for high-end products such as TROMM (washing machine),
DIOS (refrigerator) and Cyking (vacuum cleaner), while exports increased 12.9% to 3.11 trillion won, on the
strength of improving product quality and high brand recognition. Side-by-side door refrigerators, drum-type
washing machines, commercial air-conditioners and light ovens were the main drivers of overseas sales. In
terms of sales both at home and abroad, washing machines posted the highest growth followed by air-
conditioners, refrigerators and vacuum cleaners. Most other white goods also recorded double-digit growth.
> Digital Display and Media
The Division produces monitors, television sets, optical storage units, personal computers, PDPs (plasma
display panels) and so on. The Division’s sales grew 17.2% to 7.94 trillion won in 2002 on the back of a
spike in demand from the 2002 World Cup finals, which was held in Korea and Japan, strong demand for
premium products and timely marketing of new products. Domestic sales rose 18.1% to 1.74 trillion won
while exports increased 16.9% to 6.20 trillion won in 2002. As a result, the Division accounted for 42.7% of
the Company’s total sales. By product, consumer electronics such as television sets and audio/video
equipment led the growth, jumping 42% and 30% respectively in 2002. However, products in the IT category
exhibited relatively low growth due to weak demand caused by an overall slowdown of the IT industry and
falling average selling prices of major products. Monitors, optical storage units and personal computers
recorded 11%, 6% and 4% growth respectively. Digital TVs, core products in the digital age, enjoyed
significant growth in the wake of the World Cup. In the case of audio/video equipment, newly introduced
digital products such as Combi (combined DVD/VCRs) and home theater systems led growth. Sales of PDPs
surged on the back of excellent quality and productivity and are expected to continue to grow substantially in
the future given the strong demand and the Company's production capacity expansion plan. As optical
storage business maintained global top position in 2002, the Company solidified its leading global position by
the timely introduction to the market of new products such as high-speed CD-RWs.
> Mobile Handset
In 2001, the Division made a significant breakthrough by recording annual mobile handset sales of over 10
million units. With the help of product leadership, strong global marketing and distribution channels,
enhanced brand power, and cost leadership, the Division recorded 3.52 trillion won in handset sales in 2002,
a 45.9% increase from the previous year’s 2.42 trillion won. Domestic sales increased 24.2% to reach 1.17
trillion won while overseas sales soared 59.8% to 2.35 trillion won. In terms of sales volume, the Company
shipped around 16 million units in 2002, up 58% over the previous year. Domestic sales of CDMA handsets
increased 10.7% while exports of CDMA handsets jumped 47.2%. Moreover, sales of GSM handsets
increased tenfold in 2002, just one year after the Company started GSM production. With the soaring sales,
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