LG announced today that it would be abolishing one of its divisions next year as it attempts to fix a recent financial downturn.
The South Korean firm released a statement today explaining that a number of “restructuring commitments” would take place including the dismantling of its business-solutions unit in order to focus strongly on boosting the development of advanced technology in order to accelerate future growth.
The loss of the business solutions industry will leave four divisions, home entertainment, mobile communications, home appliances and the merged air-conditioning & energy solution.
The move has been made following a previous announcement from LG of a 99 percent decline it is third-quarter figures, writes The Wall Street Journal, with losses in the firm’s key handset business and declining demand in Europe and the US affecting LG’s profitability. LG is the third largest handset producer by shipment, trailing Nokia and Samsung.
However it is was noted that the company’s shares rose today by 1.4 percent today following the news LG would be restructuring in order to addess the previous poor financial performance of the world’s second largest LDC TV manufacturer.
An analyst from Hanwha Securities, Kim Un-ho said that the restructuring could soon have a positive effect. “It will continue to post an operating loss in the fourth quarter, but could see a turnaround by the first quarter of next year, mainly helped by an improvement from its air-conditioner sales,” said Un-ho.
It said by LG that the unprofitable business solutions unit will give way in order to place more emphasis on individual products, with the monitor and solution business units transferring to the home entertainment company.
Other changes to the firm will include the development of new capabilities for the home appliance component business, with the establishing of a compressor and motor business unit. There will also be a separate healthcare business team, and a separate commercial water business team to drive forward the water business.
Furthermore the retitled air conditioning and energy solution is expected to take on future growth opportunities in areas such as solar and LED lighting.