LG returns to profit as TV sales improve LG Electronics, the world's second-largest television maker by sales, returned to profit in the first quarter as higher sales of premium televisions and smartphones improved its profit margins despite growing competition in its key business areas. The South Korean company swung to a net profit of Won242.5bn ($213m) in the January-March period, from a Won15.8bn net loss a year earlier. Operating profit more than trebled to Won448.2bn while sales fell 7.1 per cent to Won12.2tn. The handset division, which had been a major drag on the company's earnings, reported a second consecutive profit, of Won35bn, after six quarterly losses as its Optimus smartphones running on faster next-generation networks gained popularity. Analysts expect the earnings momentum to continue as LG beefs up its smartphone line-up and introduces higher-end TV models, while seasonal demand for air-conditioners is projected to rise sharply in the current quarter. LG itself expects margins to face some pressure. "Sales are likely to increase slightly from the first quarter on new product releases of TVs and handsets, but profits are expected to come in at around the first quarter's level or slightly lower, as we expect a sharp increase in marketing costs to promote new products," Jung Do-hyun, the company's chief financial officer, told analysts. Apple overtook LG as the world's third-largest handset maker by sales last year, according to estimates from market researcher Strategy Analytics. Its first-quarter phone sales fell 22 per cent to 13.7m units from the previous quarter as it faces growing competition from lower-cost Chinese rivals such as Huawei Technologies and ZTE Corp. But handset margins improved to 1.4 per cent from minus 3.5 per cent a year earlier as the company's focus shifts to smartphones from lower-end feature phones. ZTE, the world's fourth-largest handset maker by sales, on Wednesday said net profit rose 19 per cent to Rmb151m ($24m) in the first quarter, following three quarters of losses. LG is still far behind its bigger rivals such as Apple and Samsung Electronics in the heated smartphone race. LG sold 4.9m smartphones in the first quarter while Apple sold 35m iPhones and Samsung is estimated to have sold about 44m smartphones. However, LG's overall profitability was bolstered by strong sales of its 3D TVs and internet-connected TVs, while Japanese rivals struggle in the TV market facing slowing demand and a strong yen. LG and Samsung now dominate the global TV market, taking share from Sony, Panasonic and Sharp which expect to have lost a combined $21bn in the fiscal year ended March 31. LG's operating profit at the TV division nearly doubled to Won217bn in the first quarter, with profit margins of 4.1 per cent. TV margins are expected to improve further in the second half when LG plans to launch higher-end TVs using organic light-emitting diode technology. The group aims to boost LCD TV sales this year by about 20 per cent to 30m units, seeking to become the largest seller of 3D TVs by capturing about one quarter of the market. Shares of LG Electronics closed down 1.3 per cent on Wednesday, while the benchmark Kospi index slipped 0.1 per cent.