LG scales down growth forecasts due to setbacks in Iran and Iraq

DUBAI — Digital leader LG Electronics has scaled down its Middle East/Africa growth projections for 2005 from 34 per cent to 20 per cent due to unexpected setbacks in key regional markets including Iran and Iraq.

By Isaac John

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Published: Wed 9 Nov 2005, 9:50 AM

Last updated: Thu 2 Apr 2015, 5:14 PM

The Korean giant, which emerged as the region's number one consumer electronics provider with record 2004 sales turnover of $2.1 billion, a 38 per cent increase, said it suffered from lower than expected performance in Iran when sales plunged from $388 million in 2004 to $300 million this year.

LG, which was targeting a turnover of $2.8 billion, is now on course to achieve a sales target of $2.5 billion for 2005.

Citing recent political developments in Iran as the reason for the sales drop, Ki H. Kim, President of LG Electronics, Middle East and Africa Operations, the outlook for its operations remained unpredictable. A similar sales drop was experienced in Iraq and Algeria, Kim pointed out.

Notwithstanding such setbacks, LG is on pace to achieve a revised target of 20 per cent growth. "The market is on a roll driven by the oil boom. Next year, we target a 30 per cent growth, and central to that surge will be more than two-fold growth expected in mobile phone sales," he said. In 2005, GSM phone sales rose to 1.5 million units from 900,000 units in 2004 in the Middle East/Africa region comprising 80 countries.

"We expect to post a strong growth in handset sales next year with a whole new range of products," Kim said.

In Iran, LG is also joining its local partners Gold Iran to set up a an air-conditioning plant. It currently operates an IT manufacturing facility in Iran, apart from owning a room air-conditioning plant in Turkey and a television plant in the Egypt.

In 2004, LG's digital appliance sales accounted for $832 million, home electronics $ 785 million, IT products $ 315 million and GSM handsets $169 million. The company's biggest selling regional markets last year were Iran, accounting for $388 million in turnover, the lower Gulf, notching up $364 million in sales and South Africa, reporting sales of $344 million. Turkey, registering sales of $145 million, Iraq $65 million and Morocco with turnover of $112 million were its fastest growing markets.

Kim said LG has maintained its market leading status as the leading supplier of TVs, air conditioners, monitors, refrigerators, mobiles, washing machines, PDPs and optical storage products. Growth in these product segments was driven by the introduction of a wide range of new products and superior technology.

"We are strengthening our market leading position by rolling out technologically advanced products to cater to the demands of specific markets. We believe localising products enhances overall brand equity and will focus on mobile phones, notebooks and PDP televisions. We are also targeting a big boost in notebook sales and handset sales next year," said Kim.

Kim said LG is the market leader in the PDP TV segment in 17 countries including the UK, Germany, Spain, Australia, Saudi Arabia, and South Africa; the company aims to be the market leader in 30 countries by 2005. By focusing on strategic linkages between home audio-video, car infortainment and mobile audio-video business, LG aims to rank among the top three global players in the digital display and media segment by 2007.

LG has retained its ranking as the world's leading air conditioner supplier for the fifth consecutive year selling more than ten million units in 2004, securing 20 per cent market share. Leading Japanese market research consultancy Fuji-Keizai estimates that the Korean giant made one out of every five A/Cs sold around the world last year.

Kim said LG is in the forefront of humanitarian efforts through its contribution to the quake relief efforts in Pakistan. "We will continue our commitment both to sports and cause related marketing. For the next two years, LG is the official sponsor of both the Iraq national football team and the country's Olympic team. Other activities include innovative channel and marketing campaigns, the LG Football Cups, organising high profile music festivals around the region and the establishment of a regional public relations network to produce country and area specific messages."

"Our marketing will take on more social issues this year as we strive to get closer to our customers and take on the mantle of the region's leading national brand. We have already initiated 'Marketing to Women' programme in Dubai last year, we will roll this out throughout the region in 2005. LG aims to become the top national brand by putting people's needs and aspirations at the heart of our business. We will continue to introduce products that serve genuine and relevant customer needs," said Kim.

On LG's anti-counterfeiting measures, Kim said his company is working with local law enforcement authorities to explore ways in which they can cooperate to tackle sales and production of counterfeits electronic brands. “LG has launched this campaign primarily to protect consumers from deceptive products being sold under our brand name. An assurance on quality control is part of LG’s commitment to our customers,” he said.

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