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LG Elec sees 80 percent drop in fourth quarter profit; analysts point to thinning TV margins

LG Elec sees 80 percent drop in fourth quarter profit; analysts point to thinning TV margins
FILE PHOTO: Visitors walk past the showroom of LG Electronics during the Auto China 2016 show in Beijing, China April 26, 2016. REUTERS/Kim Kyung-Hoon/File Photo -
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Kim Kyung Hoon(Reuters)
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SEOUL (Reuters) - South Korea's LG Electronics Inc <066570.KS> said on Tuesday its fourth-quarter operating profit likely plummeted 80 percent from the same period a year earlier, falling well below analyst expectations.

The world's second-biggest television set maker behind compatriot Samsung Electronics Co Ltd <005930.KS> estimated profit of 75.3 billion won (52.5 million pounds)for October-December last year. That would compare with the 387 billion won average of 11 analyst estimates in an I/B/E/S Refinitiv poll.

Revenue likely fell 7 percent to 15.8 trillion won, LG said in a regulatory filing, versus analysts' 16.3 trillion won estimate.

LG did not disclose further details of fourth-quarter operations and will announce full results at the end of January.

Analysts said likely causes included profit margins for its high-end TVs being thinned by increasing competition, while the firm's smartphone business continues to lose money.

"It's a surprise," said analyst Lee Jae-yun at Yuanta Securities. "Home appliance sales were worse in emerging markets and China, while its high-end TV business isn't making profit as much as before."

Analysts also said earnings were likely squeezed by higher year-end bonuses and marketing expenses for new handsets.

LG held a 3 percent share of the global smartphone market in the second quarter of last year, showed latest data from market tracker Counterpoint Research.

Earlier in the day, Samsung estimated a 29 percent drop in quarterly profit, its first decline in two years, as it flagged tough memory chip and mobile phone markets.

(Reporting by Heekyong Yang and Ju-min Park; Editing by Christopher Cushing)

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