[Edaily Reporter SOYEON KIM ] LGELECTRONICS’ U.S. subsidiary has significantly restored its profitability after one year. Although the company posted a loss last year as export costs to the U.S. surged due to high U.S. tariffs, its performance is believed to have returned to normal this year as it reduced the tariff burden through supply chain restructuring, including the diversification of production bases. Analysts also attribute the improved performance to profitability-focused business strategies, such as expanding local production and strengthening sales of premium products.

According to LGELECTRONICS’ semi-annual report released on the 21st, the cumulative net income of LGELECTRONICS’ U.S. subsidiary (LGEUS) for the first half of this year totaled 802.4 billion won. This marks a turnaround from the net loss of 6.8 billion won recorded in the first half of last year. LGEUS, which posted a net loss of 43.4 billion won in the second quarter of last year, returned to profitability in the second quarter of this year with a net income of 618.5 billion won.

In April of last year, the U.S. announced high reciprocal tariffs against various countries and imposed a 10% base tariff. In addition, tariffs on steel and steel-derived products under Section 232 of the Trade Expansion Act were raised from 25% to 50%, resulting in high tariffs being applied to products with a high proportion of steel content, such as refrigerators and washing machines.

As a result, washing machines and dryers produced at the company’s Tennessee plant were affected by rising costs of imported steel parts, while finished products exported directly to the U.S. from Asian production hubs—such as Changwon, South Korea, and Vietnam—were subject to direct tariffs. In the second quarter of last year, the profitability of the U.S. subsidiary deteriorated as significant one-time tariff costs and selling, general, and administrative expenses were reflected in the financials.

To counter the U.S. government’s high tariffs, LGELECTRONICS pursued a strategy of expanding production volumes of washing machines, dryers, and wash towers at its Clarksville, Tennessee, plant and increasing the proportion of production within North America, including its Mexican production hubs. By restructuring its supply chain with North American production bases such as Reynosa and Monterrey in Mexico, the company structurally reduced its exposure to tariffs on imports from outside the region.

During an earnings conference call earlier this year, LGELECTRONICS also presented a supply chain optimization plan to gradually expand the share of production within North America to over 60%. It is interpreted that the company has restored profitability by reducing the tariff burden through expanded local production while simultaneously improving supply chain efficiency.

The refund of previously paid tariffs also played a major role in the normalization of earnings. A one-time gain was recognized after the company received a refund of approximately 300 billion won in tariffs following the U.S. Supreme Court’s ruling that the tariffs were unlawful. During last month’s second-quarter earnings conference call, LGELECTRONICS stated, “The U.S. government’s tariff refund process proceeded smoothly, and we received a full refund for the amount subject to the second quarter,” adding, “The overall impact on profit and loss, after deducting one-time expenses from one-time revenue—including the refund—is approximately 300 billion won.”

Even excluding this one-time refund effect from the first-half net profit of 802.4 billion won, the actual net profit is estimated to be around 500 billion won. This figure significantly exceeds the typical annual level of approximately 300 billion won prior to the tariff issue.

Given that the company posted results exceeding the average annual level even excluding the one-time tariff refund, analysts assess that its earnings resilience has improved beyond a simple base effect. An improvement in the product sales mix is a prime example. It is interpreted that the company defended its profitability by reflecting the increased cost burden from tariffs in the pricing of new products, which are centered on premium items.

Analysts also note that the expansion of business-to-business (B2B) products—such as high-efficiency heat pumps and heating, ventilation, and air conditioning (HVAC) systems, which have recently established themselves as high-margin businesses in North America—has positively contributed to the improved performance, in addition to premium white goods.