LG Electronics Inc., the world’s third-largest maker of mobile phones, reported a second-straight increase in quarterly profit, driven by sales of flat-panel televisions.

Third-quarter net income surged to 807.2 billion won ($685 million), from 24.9 billion won a year earlier, Seoul-based LG said in a statement today. Sales, including those of overseas affiliates, rose 16 percent to 13.9 trillion won.

LG may post its lowest operating profit in a year in the current period as the company boosts spending to win market share and as competition intensifies, according to analysts at brokerages including Nomura Holdings Inc. LG said last month it aims to sell 120 million handsets this year, at least 9 percent more than its previous target, and plans to increase shipments of liquid-crystal-display TVs by about 47 percent in 2010.

The company was projected to report third-quarter net income of 734 billion won on sales of 14.2 trillion won, according to the median estimate of 17 analysts surveyed by Bloomberg News.

Operating profit, or sales minus the cost of goods sold and administrative expenses, increased 49 percent to 850.2 billion won. Analysts in the survey estimated LG would post income of 762 billion won.

Second-half earnings

LG fell 0.4 percent to 118,000 won at 1:13 p.m. on the Korea Exchange. The shares have lost 11 percent in the past three months amid concern second-half profit may be lower than expected. The benchmark Kospi index has advanced 11 percent in the period.

LG’s third-quarter mobile-phone shipments rose 37 percent to a record 31.6 million handsets, generating profit of 384.4 billion won. That compares with the 423-billion-won income estimated in the Bloomberg survey.

The company began sales of the touch-screen New Chocolate phone this month and plans to offer the LG-GW620 handset equipped with Google Inc.’s Android operating system during the current period.

Nokia Oyj, the world’s largest mobile-phone maker, last week posted its first net loss since the company began reporting quarterly in 1996, hurt by costs related to a joint venture with Siemens AG and weaker demand. Nokia said its mobile-phone shipments in the third-quarter fell 8 percent from a year earlier to 108.5 million units.

Phone profitability

Shipments at LG will increase 15 percent this year to 116.2 million units, bucking an 8-percent drop in industry sales, according to John Soh, an analyst at Shinhan Investment Corp. in Seoul. The profit margin at LG’s handset business will fall to 8.3 percent in 2009, compared with 11 percent last year, according to Soh.

Profit at LG’s home-entertainment division, which makes TVs and DVD players, increased more than sevenfold to 254.8 billion won. The median estimate from the Bloomberg survey predicted income of 148 billion won. Sales at the business, formed in December by combining LG’s display and media-product operations, rose 24 percent to 4.93 trillion won.

LCD TVs

LG said last month it expects to sell 25 million LCD TVs in 2010, compared with about 17 million sets this year, while shipments of its plasma TVs will probably rise 33 percent to 4 million. The company is betting on new products such as its Borderless LCD TVs and sets using light-emitting diodes, or LEDs, as screen backlights to help boost sales.

“We view positively its longer-term growth targets,” including the LCD TV shipment forecast, James Kim, a Hong Kong based-analyst at Nomura, wrote in a report last week. Still, LG won’t generate any profit from its LCD TV business in the fourth quarter because of higher marketing costs and panel prices, according to the report.

Global LCD TV shipments will rise 24 percent to 130 million units this year and 19 percent in 2010, according to Austin, Texas-based researcher DisplaySearch in September. Worldwide revenue from LCD TVs will drop 3 percent this year, less than its earlier projection for a 6-percent decline, according to DisplaySearch.

Profit at the home-appliances division, which competes against products from Whirlpool Corp. and Electrolux AB, increased 52 percent to 170.2 billion won. Analysts in the survey projected income of 134 billion won.

Air Conditioners

LG, which separated air conditioners from the appliances business in December, said profit from the product was 13.8 billion won, compared with the 36-billion-won median analyst estimate.

The company also booked a 209.7- billion-won gain from LG Display Co., the world’s second-largest LCD maker, which last week reported an 89.5-percent increase in quarterly profit.

Currency-related gains in the third-quarter totaled 70.6 billion won, compared with losses of 389.5 billion won a year earlier as the stronger won reduced the cost of LG’s foreign liabilities, the company said. (Bloomberg)