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1Q12 Earnings Release

2012 th 2012 April 252 1


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All information regarding management performance and financial results of LG Electronics (the Company) during the 1st quarter of 2012 as contained herein has been prepared on a consolidated basis in accordance with International Financial Reporting Standards (IFRS). In addition, the information regarding results of 1st quarter of 2012 has been prepared in advance, prior to being reviewed by outside auditors, solely for the convenience of investors of the Company, and is subject to change in the process of final reviewing by outside auditors. The information contained herein includes forward-looking statements in respect to future plans, prospects, and performances of the Company as well as the Companys projected sales plan for 2nd quarter of 2012. These forward-looking statements also refer to the Companys performance on consolidated base, as indicated. The aforementioned forward-looking statements are influenced by changes in the management environment and relative events, and by their nature, these statements refer to uncertain circumstances. Consequently, due to these uncertainties, the Companys actual future results may differ materially from those expressed or implied by such statements. Please note that as the forward-looking statements contained herein are based on the current market situation and the Companys management direction, they are subject to change according to the changes in future market environment and business strategy. The information contained herein should not be utilized for any legal purposes in regards to investors investment results. The Company hereby expressly disclaims any and all liability for any loss or damage resulting from the investors reliance on the information contained herein.

Table of Contents
. Overview . 1Q12 Results (Consolidated) . Performance and Outlook by Sector

. Overview

Comment on 1Q12 Results

Comment on 2Q12 Outlook

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1Q12 Results

II. 1Q12 Results (LGE Consolidated)


Sales
(Unit : KRW tn)

Sales/Profit

Profit
(Unit : KRW bn)

13.81
11.5%

12.23

7.1%

13.16
4Q11
QoQ

1Q12

YoY

1Q11

Operating Profit

23

425bn

448

317bn

131

EBITDA

329

440bn

769

340bn

429

Net Profit

-112

355bn

243

259bn

-16

4Q11

1Q12

1Q11 5 2

II. 1Q12 Results (LGE Consolidated)

Net Profit

Net Profit
(Unit: KRW bn)

Investment Income
(Unit: KRW bn)

Investment income 75 73 Net financial expense LG Display 207 Tax LG Innotek 448 Others

4Q11 -2

1Q12 -56

-57

-9

243

19

140

Investment Income Op. Profit Net Profit

-40

75

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II. 1Q12 Results (LGE Consolidated)


1Q Net* Cash Flow
(Unit : KRW bn)

Cash Flow Statement

Cash Flow Statement


(Unit : KRW bn)

4Q11
FX effect from foreign currency denominated cash Increase in working capital

1Q12
2,346 501 243 321 -75 348 -336 -89 -260 -61 0
-181

Cash In
31

Cash Out
75 Investment income

Cash at beginning of period Cash flow from operating activities Net income Depreciation Investment income Increase in working capital Others

2,750 398 -112 306 40 658 -494 -741 -496 -88 -57 7 976 -969 -68 -404 2,346

348

336

Others

89 Depreciation 321

Cash flow from investing activities

Cash flow from investing activities Increase in tangible assets Increase in intangible assets Changes in the scope of consolidation

443 243

Cash flow from financing activities Rights offering Increase in debt FX effect from foreign currency denominated cash Net changes in cash Cash at end of period

9 -190 31 262 2,608

Net Profit

Net

*Net= Excluding Cash flow from financing activities

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II. 1Q12 Results (LGE Consolidated)


Balance Sheet
(Unit: KRW tn)

Financial Structure

Financial Ratio
(Unit : %)

4Q10 Assets Current Assets Cash Inventory Non-Current Assets Liabilities 32.32 16.51 1.94 5.87 15.80 19.46

4Q11 32.66 15.78 2.35 4.95 16.88 19.51 14.21 5.30 13.15 7.44 5.09

1Q12 32.40 15.77 2.61 4.90 16.63 19.01 13.38 5.63 13.39 7.25 4.64 Net Debt to Equity Total Liability to Equity

4Q10

4Q11

1Q12

151

148 142

56

57 54

Debt to Equity

15.32 Current Liabilities Non-Current Liabilities 4.14 Equity Debt Net Debt 12.86 7.19 5.25

41

39 35

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Performance and Outlook

III. Performance and Outlook by Sector

Sales/Profit

Consolidated Sales and Profit by Division


(Unit : KRW bn)

4Q11 Home Entertainment Mobile Communications Handset Home Appliance Air Conditioning & Energy Solution Sales Op. Profit Sales Op. Profit Sales Op. Profit Sales Op. Profit Sales Op. Profit 6,626 122 2,775 12 2,695 10 2,978 71 687 -38

QoQ 19.6%

1Q12 5,330 217

YoY 6.8%

1Q11 5,719 113

10.0%

2,497 39

14.2%

2,909 -101

9.0%

2,452 35

14.0%

2,852 -101

14.9%

2,536 152

2.7%

2,607 102

77.4%

1,218 81

1.2%

1,233 34

* Divisional sales includes internal transactions between divisions

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III. Performance and Outlook by Sector


1Q12 Performance
Business Performance
(KRW tn)

Home Entertainment

Sales : Declined QoQ and YoY due to slower season and sluggish European economy
TV : LCD TV sales increased YoY and gained market share due to strong 3D TV sales despite slow demand IT : Revenue was down due to weak IT and AV demand

Op. Margin

4.1% 1.8% 1.5%

2.0%

1.7%

Profitability : Improved due to successful new product launches, mainly for 3D TVs, and improvement in supply chain management
Sales

2Q11 Outlook
5.72 5.82 5.74 6.63 5.33

Market : Expect demand to pick up for LCD TV, especially for 3D and Smart TVs, while the London Olympics is expected to stimulate overall demand growth both QoQ and YoY LGE : With the global launch of the narrow bezel Cinema Screen design 3D TV, LGE aims to become number one for 3D TVs and plans to continue focusing on profitability through innovative changes in operation 11 7

1Q11

2Q'11

3Q'11 4Q'11 1Q12

III. Performance and Outlook by Sector


1Q12 Performance
Business Performance
(KRW tn)

Mobile Communications

Sales : Shipments decreased 22% QoQ to 13.7M and revenue declined 10% QoQ to KRW 2.5 trillion Although revenue was down due to shipment decline of feature phones, with strong sales of Optimus LTE and Optimus Vu: in Korea, smartphone revenue increased Profitability : Maintained a slight profitability due to better product mix with increased smartphone sales portion, mainly from LTE phones, and better cost structure from improved efficiency in operations

Op. Margin

1.6% 0.4% -1.7%

-3.5% -5.0%
Sales

2Q11 Outlook

Market : Although total demand for handsets is not expected to grow fast, continuous growth for the smartphone market is expected, especially for LTE phones in the developed countries with the European market planning to commercialize LTE LGE : Plan to expand LTE model line up for the developed markets while launching our design-centric L-Style series 3G smartphones and a quad-core smartphone to strengthen LGEs position in the handset business 12 8

III. Performance and Outlook by Sector


1Q12 Performance
Business Performance
(KRW tn)

Home Appliance

Sales : Declined 3% YoY to KRW 2.5 trillion


Korea : Revenue increased 5% YoY by focusing on large size and premium products
6.0%

Op. Margin

3.9% 2.8% 2.1%


Sales

Overseas : Despite continued growth in the overall developing countries, sales declined 4% YoY due to slowdown in the developed countries and China

2.4%

Profitability : Increased profitability due to higher ASP, better product mix, and cost efficiency

2Q11 Outlook
2.61 2.80 2.69 2.98 2.54

Market : Expect continuous slowdown in the developed countries and rising oil prices to negatively affect raw material prices LGE : Plan to lead the market with differentiated products and efficiently allocate resources in order to strengthen business fundamentals

1Q'11

2Q'11

3Q'11

4Q'11

1Q'12

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III. Performance and Outlook by Sector Air-Conditioning & Energy Solution


1Q12 Performance
Business Performance
(KRW tn)

Sales : Revenue increased 77% QoQ but declined 1% YoY to KRW 1.2 trillion
6.7%

Op. Margin

Korea : Grew 1% YoY Overseas : Declined 3% YoY due to a stagnant economy for the developed

2.8% 3.6% 0.2%

markets and slowdown in growth for several developing countries

-5.6%
Sales

Profitability : Margins improved sharply due to increased portion of new models and high-end products, along with improvement in cost structure

2Q11 Outlook
1.66 1.23 1.22 0.69

1.01

Market : Despite strong seasonality, expect economic recession to remain as a negative aspect. However, government policies to promote the usage of energy-efficient products to create new growth opportunity LGE : Plan to focus on profitability by securing competitiveness in energy efficient products

1Q`11

2Q`11

3Q`11 4Q`11

1Q`12

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http://www.lg.com
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Appendix. 2012 Business Reorganization


- The Commercial Water Treatment business unit from the HA Company was transferred as an independent business unit - The PC and Car business unit, which was originally an independent business unit, was transferred to HE Company - The new business structure is effective as of December 1, 2011
- Commercial Water (to Independent Business Unit) - PC (to HE) - Car (to HE)

Home Entertainment

Mobile Communications

Home Appliance

Air-Conditioning & Energy Solution

Independent Business Unit

Home Entertainment
- TV - Car & Media - IT (Monitor & PC) - CEM **

Mobile Communications
- Handset - Network

Home Appliance
- Refrigerator - Washing machine - Cooking & Cleaning - Healthcare

Air-Conditioning & Energy Solution


- Residential AC - System AC (CAC, Chiller) - LED lighting

Independent Business Unit


- DS - EC (Energy Components) - Solar - Commercial Water ***

* Independent business units report directly to the CEO ** CEM= Chemical & Electronic Material *** Commercial Water= Water Treatment for industrial and municipal usage

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Appendix

Summarized Financial Statements (LGE Parent Only) *

Income Statement
(Unit : KRW bn)
2011 3Q 6,924 100.0% 2,166 31.3% 4,758 68.7% 5,559 80.3% 1,365 19.7% 1,330 19.2% (6) -0.1% 29 0.4% (204) -2.9% (175) -2.5% (52) -0.8% (122) -1.8% 2012 1Q 6,237 100.0% 2,090 33.5% 4,147 66.5% 4,955 79.4% 1,282 20.6% 1,214 19.5% 44 0.7% 112 1.8% 281 4.5% 393 6.3% 77 1.2% 316 5.1%

Sales Domestic Export Cost of goods sold Gross profit Selling & admin expense Other operating gain (Loss) Operating income (Loss) Financial income (Expense) Net profit (Loss) before tax Tax Net profit (Loss)

1Q 6,933 1,953 4,980 5,716 1,217 1,300 34 (49) 65 16 1 15

100.0% 28.2% 71.8% 82.4% 17.6% 18.8% 0.5% -0.7% 0.9% 0.2% 0.0% 0.2%

2Q 7,574 2,151 5,423 6,266 1,308 1,410 16 (87) 14 (73) (37) (36)

100.0% 28.4% 71.6% 82.7% 17.3% 18.6% 0.2% -1.1% 0.2% -1.0% -0.5% -0.5%

4Q 6,667 1,905 4,762 5,512 1,155 1,301 (47) (193) 22 (171) (37) (134)

100.0% 28.6% 71.4% 82.7% 17.3% 19.5% -0.7% -2.9% 0.3% -2.6% -0.5% -2.0%

Total 28,097 100.0% 8,175 29.1% 19,922 70.9% 23,053 82.0% 5,044 18.0% 5,340 19.0% (3) 0.0% (299) -1.1% (103) -0.4% (402) -1.4% (125) -0.4% (278) -1.0%

* Since this is not an audited nor reviewed report, content may be changed in the future if an auditor has a concern.

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Appendix

Summarized Financial Statements (LGE Parent Only) *

Balance Sheet
(Unit : KRW bn)
2011 1Q Assets Current Assets Cash and cash equivalents Accounts receivable Inventory Other Non-current Assets Investment PP&E Intangible assets Other Liabilities Accounts payable Debt Other Equity 23,970 8,990 903 6,074 1,259 754 14,980 7,845 4,732 728 1,676 14,064 4,564 5,665 3,834 9,906 2Q 24,143 8,824 860 6,017 1,151 796 15,319 7,870 4,839 830 1,780 14,278 4,271 5,919 4,088 9,864 3Q 24,931 9,302 1,456 5,953 1,144 749 15,629 7,892 5,019 872 1,845 15,196 4,538 6,550 4,108 9,735 4Q 24,199 8,154 1,364 5,077 886 827 16,046 7,965 5,191 916 1,974 13,704 3,854 5,826 4,025 10,495 2012 1Q 24,335 8,458 1,409 5,135 1,018 896 15,878 7,892 5,186 906 1,894 13,573 3,936 5,722 3,915 10,762

* Since this is not an audited nor reviewed report, content may be changed in the future if an auditor has a concern.

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Appendix

Summarized Financial Statements (LGE Consolidated)

Income Statement
(Unit : KRW bn)
2011 1Q Sales Cost of goods sold Gross profit Selling & admin expense Other operating gain (Loss) Operating income (Loss) Financial income (Expense) Investment income (Loss) Net income before tax Tax Net income Controlled shares Noncontrolled shares 13,160 100.0% 10,195 2,965 2,896 61 131 (37) (56) 39 54 (16) (30) 14 77.5% 22.5% 22.0% 0.5% 1.0% -0.3% -0.4% 0.3% 0.4% -0.1% 2Q 14,385 100.0% 11,078 3,307 3,193 44 158 (38) 29 150 41 109 98 11 77.0% 23.0% 22.2% 0.3% 1.1% -0.3% 0.2% 1.0% 0.3% 0.8% 3Q 12,897 9,851 3,047 2,964 (114) (32) (234) (265) (531) (117) (414) (424) 10 100.0% 76.4% 23.6% 23.0% -0.9% -0.2% -1.8% -2.1% -4.1% -0.9% -3.2% 4Q 13,814 10,934 2,880 2,804 (54) 23 (40) (40) (57) 55 (112) (113) 2 100.0% 79.1% 20.9% 20.3% -0.4% 0.2% -0.3% -0.3% -0.4% 0.4% -0.8% Total 54,257 42,058 12,199 11,856 (63) 280 (349) (331) (399) 34 (433) (470) 37 100.0% 77.5% 22.5% 21.9% -0.1% 0.5% -0.6% -0.6% -0.7% 0.1% -0.8% 2012 1Q 12,228 9,314 2,914 2,551 85 448 (73) 75 450 207 243 236 7 100.0% 76.2% 23.8% 20.9% 0.7% 3.7% -0.6% 0.6% 3.7% 1.7% 2.0%

* Since this is not an audited nor reviewed report, content may be changed in the future if an auditor has a concern.

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Appendix

Summarized Financial Statements (LGE Consolidated)

Balance Sheet
(Unit : KRW bn)
2011 1Q Assets Current Assets Cash and cash equivalents Accounts receivable Inventory Other Non-current Assets Investment PP&E Intangible assets Other Liabilities Accounts payable Debt Other Equity 33,534 17,660 2,212 7,376 6,376 1,697 15,874 5,868 6,645 766 2,594 20,802 6,367 7,721 6,714 12,732 2Q 33,845 17,534 2,243 7,512 6,091 1,688 16,310 5,889 6,810 881 2,731 21,101 6,320 7,764 7,017 12,744 3Q 34,376 17,733 2,750 7,115 6,217 1,652 16,644 5,671 7,108 928 2,936 21,804 6,227 8,528 7,049 12,572 4Q 32,659 15,783 2,346 6,753 4,947 1,738 16,875 5,603 7,290 1,036 2,946 19,510 5,487 7,436 6,588 13,148 2012 1Q 32,397 15,768 2,608 6,518 4,896 1,746 16,629 5,427 7,356 1,024 2,822 19,005 5,457 7,251 6,297 13,392

* Since this is not an audited nor reviewed report, content may be changed in the future if an auditor has a concern.

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Appendix

Divisional Sales (LGE Consolidated)


(Unit : KRW bn)
1Q'11 2Q'11 5,819 98 1.7% 3,246 -54 -1.7% 3,200 -55 -1.7% 2,801 59 2.1% 1,660 60 3.6% 860 -4 14,385 158 1.1% 3Q'11 5,740 89 1.5% 2,762 -139 -5.0% 2,689 -140 -5.2% 2,695 74 2.8% 1,006 2 0.2% 694 -58 12,897 -32 -0.2% 4Q'11 6,626 122 1.8% 2,775 12 0.4% 2,695 10 0.4% 2,978 71 2.4% 687 -38 -5.6% 749 -144 13,814 23 0.2% '11 Total 23,903 422 1.8% 11,693 -281 -2.4% 11,436 -286 -2.5% 11,081 306 2.8% 4,585 57 1.2% 2,995 -223 54,257 280 0.5% 1Q'12 5,330 217 4.1% 2,497 39 1.6% 2,452 35 1.4% 2,536 152 6.0% 1,218 81 6.7% 647 -41 12,228 448 3.7% QoQ YoY -20% -7%

Home Entertainment

Sales Op. Income (%) Sales Op. Income (%) Sales Op. Income (%)

Mobile Communications

Handset

Home Appliance

Sales Op. Income (%) Sales Op. Income (%)

Air Conditioning & Energy Solution

5,719 113 2.0% 2,909 -101 -3.5% 2,852 -101 -3.5% 2,607 102 3.9% 1,233 34 2.8% 692 -18 13,160 131 1.0%

-10%

-14%

-9%

-14%

-15%

-3%

77%

-1%

Others

Sales Op. Income

-14%

-7%

Total

Sales Op. Income (%)

-11%

-7%

* Others include independent business unit earnings, other subsidiaries earnings, internal transactions, etc. * Since this is not an audited nor reviewed report, content may be changed in the future if an auditor has a concern.

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