LG Electronics reported a sharp drop in its net profit for the third quarter, with its Mobile Communications unit posting significant declines in both sales and operating profit due to what the company said was a challenging global smartphone market.

The division’s sales dropped 24.5 per cent year-on-year to KRW1.52 trillion ($1.3 billion), with its operating loss widening from KRW144 billion in Q3 2018 to KRW161 billion.

LG Electronics said the declines were due to the shrinking overall smartphone market, decreases in sales of premium and mass-market LTE products, and delays in 5G upgrades in North America. Compared with the previous quarter, the company said its operating loss narrowed significantly as a result of rising sales of premium 5G products, an improved cost structure from relocation of production facilities and removal of one-off relocation costs.

Looking ahead to Q4, it expects severe price competition from new products during the peak season and domestic demand to weaken from tighter subsidy regulations. Profitability is forecast to improve year-on-year from continuous cost improvement activities, such as production site relocation, but losses will widen sequentially from higher marketing expenses to support new product launches.

On a group level, net profit fell 30.5 per cent to KRW346 billion, with consolidated turnover up 1.8 per cent to KRW15.7 trillion.

The company’s other divisions, home appliances; home entertainment; vehicle components; and business solutions, all posted solid revenue gains of between 3.5 per cent and 21 per cent. Its largest division, home appliances, grew 9.5 per cent to KRW5.33 trillion.