LG Electronics likely to use increased cash flow for content service business Proceeds from business sale and JV with Magna will bolster its war chest in second half
Translated by Ryu Ho-joung 공개 2021-08-03 08:07:42
이 기사는 2021년 08월 03일 08:03 thebell 에 표출된 기사입니다.
LG Electronics’ cash flow will be bolstered by proceeds from a business sale and mobility partnership, with the South Korean company expected to use its increased war chest to expand its software presence.LG Electronics and Canada’s Magna International on July 28 completed the transaction to establish a joint venture after the South Korean company sold 49% of LG Magna e-Powertrain to Magna Metalforming for 521.3 billion won ($453 million).
The Seoul-based company also announced on July 29 that it will sell part of its chemical electronic material business to LG Chem for 525 billion won, with a target of closing the deal in November.
The two transactions will increase the company’s cash on hand by more than 1 trillion won in the second half of this year. Most of the proceeds are expected to be used to expand its content service business.
“We plan to keep focusing on diversifying our business beyond hardware and expanding the content service business,” Lee Jeong-hee, who leads the company’s home entertainment division, said during a second-quarter conference call last week. “Our acquisition of US data analysis startup Alphonso was also in line with those efforts.”
LG Electronics used much of the proceeds from its 2019 sales of the fuel cell business and water treatment units to invest in future growth drivers. It acquired automotive lighting systems provider ZKW and TV data analysis firm Alphonso, and also launched Alluto, an infotainment joint venture with Swiss software company Luxoft.
The company, known for its traditional strength in hardware, is placing an increasing focus on software as it seeks to combine technologies in both areas. LG Electronics earlier this year made its own smart TV operating system webOS available to other TV brand partners. It also recently rebranded Alphonso as LG Ads and overhauled the organization.
LG Electronics’ cash and cash equivalents were 6.19 trillion won at the end of June, slightly down from 6.3 trillion won three months earlier. Operating cash flow fell by 71% in the same period, largely due to a temporary increase in expenses related to the company’s exit from the smartphone business. But a decline in investment spending and increased debt helped the company avoid a significant drop in cash reserves.
The increased cash flow in the second half is expected to give LG Electronics greater flexibility to invest in future growth opportunities and also help improve its financial position. The company used part of the proceeds from its 2020 sale of the LG Twin Towers in Beijing to repay debt. (Reporting by Choong-hee Won)
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