LG Electronics Blames Protectionism, Imports Could Cool Further — Panjiva
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LG Electronics Blames Protectionism, Imports Could Cool Further

China 1758 Earnings 365 Industrials - Capital Goods 265 Info Tech - Tech Hardware 378 Tariffs 1169 U.S. 3297

Consumer goods manufacturer LG Electronics reported third quarter 2018 revenues that increased by just 1.3% on a year earlier. Additionally the company’s operating profits were 7.2% lower than expected by analysts according to S&P Global Market Intelligence data. The company has cited ongoing risks from “rising U.S. protectionism”. That likely refers in part to the section 201 tariffs applied to washing machines earlier in 2018, as outlined in Panjiva research of October 23.

Trade conflict is also cited as an uncertainty for the fourth quarter, though the company has also committed to accelerating its sales of “premium” products in North America for the holiday season.

Panjiva data shows that the slowdown in LG Electronics’ U.S. sales can be seen from U.S. seaborne imports associated with the company (including FNS) which fell by 15.5% in the three months to August 31 – the period associated with third quarter customer sales. A 1.2% reduction in September vs. a year earlier is not necessarily indicative of a major sales push in the fourth quarter.

LG LESS GOOD THAN LAST YEAR

Chart shows U.S. seaborne imports by LG Electronics and FNS.   Source: Panjiva

LG’s exposure to “trade conflict” comes via its sourcing of from China, which accounted for 33.5% of the total in the third quarter of 2018. The tariffs implemented by the Trump administration on $250 billion of Chinese exports, phased in between July 6 and September 24, do not yet cover many household appliances including microwave ovens (HS 8514) and dishwashers (HS 8422) though refrigerators (HS 8418) were included in the most recent tariff round.

CHINA ACCOUNTS FOR ONE-IN-THREE OF LG’S U.S. IMPORTS

Chart segments U.S. seaborne imports by LG Electronics and FNS by country of origin.   Source: Panjiva

The impact of tariffs on LG Electronics’ refrigerator imports could be particularly marked given China accounted for 69.3% of U.S.-inbound shipments. Meanwhile an extension of tariffs to a wider range of goods would have an impact on microwaves (55.0% from China) and televisions (80.0%).

WASHING MACHINES LEAD, FRIDGES FOLLOW IN LG’S U.S. IMPORT MIX

Chart segments U.S. seaborne imports by LG Electronics and FNS by product (HS-4) and country of origin. Top 20 products shown.   Source: Panjiva

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