LG Elec Q2 profit up 25% on lower handset loss

 LG Electronics posted a 25% annual rise in quarterly profit on Wednesday, as its handset business sharply cut losses and its television division returned to a small profit, sending its shares up 3.3%.

The company's profit, however, may sink again in the current quarter as it struggles with stubbornly weak demand for TVs and fails to fully pass on rising costs of making refrigerators, washers and ovens, analysts say.

Investor concerns over its loss-making handset business continue to linger however, as LG Electric cannot keep up with the blistering pace set by Apple and major handset vendors that use Google's Android platform.

LG recently slashed its 2011 sales target for handsets and smartphones.

LG, the world's No 2 TV maker and No 3 handset maker, reported an April-June operating profit of 158 billion won (USD 150 million), versus a consensus forecast of 200 billion won by Thomson Reuters I/B/E/S.

The result was better than 133 billion won profit by StarMine's SmartEstimate, which places more weight on recent forecasts by top-rated analysts.

That compared with a profit of 126 billion won a year ago and 131 billion won in the preceding quarter.

Losses from its handset business more than halved to 55 billion won from 120 billion loss a year ago. But it remained in the red for a fifth consecutive quarter as the firm fails to introduce hit smartphone models that can challenge heavyweights Apple and Samsung Electronics.

Like Nokia, LG has been slow to revamp its high-end offering and weakened brand quality has forced it to compete on prices, hitting profitability.

Earlier this month, LG cut its 2011 smartphone sales target by 20 percent to 24 million units and its overall handset shipment target by a quarter to 114 million units.

Shares in LG, which trails Nokia and Samsung Electronics in handsets and competes with Sony Corp and Panasonic Corp in flat-screen TVs, have fallen by around a fifth over the past three months versus a 2% drop in the wider market.