LG sees sales up 7 percent this year

Leony Aurora, The Jakarta Post, Jakarta

As the economy slows down, a local unit of South Korean electronics giant LG sees a lower-than-expected 7 percent rise in sales this year, with the number of lower-end units sold on the decline.

LG Electronics Indonesia (LGEIN) recorded sales of US$352 million in 2005, up from $330 million booked in the previous year, president director Lee - Kee Ju said during the announcement of the company's year-end report on Thursday.

Domestic sales amounted to 68 percent of total sales, or some $240 million, while the rest came from exports.

"The biggest portion from domestic sales is from tv sets, which contributed 39 percent of sales," said Lee.

Area sales manager Hendru Susilo said the recent fuel price hike as well as several massive natural disasters at the beginning of the year slowed down sales of lower-end products, such as conventional televisions, causing the company to miss their target of 30 percent revenue growth.

Although by unit sales were down, strategic and premium products such as two-door refrigerators, flat screen televisions, plasma televisions and front-loading washing machines boosted revenues, said Hendru, without elaborating.

For next year, the company will target sales growth of 30 percent, focusing its promotion on the higher-end products.

"The (soccer) World Cup next year will hopefully push sales of conventional televisions," said Hendru.

LGEIN plans to increase production of color television slightly from 1.45 million units this year to 1.5 million in 2006, while refrigerator production will jump by 78 percent to 1.6 million units next year from 900,000 units this year.

As demand increases, the company also plans to boost its capacity of plasma televisions more than seven-fold to 15,000 units assembled annually in 2006, up from 2,000 units in 2005.

To increase its capacity, LGEIN is ready to spend $114 million in investment, comprising $38 million for research and development and $76 million for production facilities.

Lee declined to elaborate on the planned investment, saying the company would publish it with the announcement of its merger with another LG local unit LG Electronics Display Devices Indonesia (LGEDI) on Jan. 7.

This year, LGEIN spent $92 million in capital expenditures, including an investment of $33 million on research and development.