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LG Electronics reported robust financial results for the second quarter of 2025, with consolidated sales reaching ₩20.74 trillion and a net income of ₩609.7 billion. Despite challenging market conditions, the company’s stock saw a 1.7% increase following the earnings announcement, reflecting positive investor sentiment.
Key Takeaways
- LG Electronics reported a 36% year-on-year increase in first-half net income.
- The company is focusing on expanding its B2B segments and strengthening its webOS platform.
- Market conditions remain challenging due to geopolitical risks and tariff policy changes.
Company Performance
LG Electronics demonstrated strong performance in Q2 2025, with significant growth in net income and sales across various segments. The company has been actively expanding its presence in the B2B market, particularly in automotive, electronics, and HVAC sectors. Despite a difficult macroeconomic environment, LG’s strategic initiatives appear to be paying off, as reflected in its financial results.
Financial Highlights
- Sales: ₩20.74 trillion
- Operating Profit: ₩639.4 billion
- Net Income: ₩609.7 billion
- Operating Cash Flow: ₩1.54 trillion
- Cash Balance: ₩7.57 trillion
Outlook & Guidance
Looking forward, LG Electronics is committed to transforming its portfolio and expanding its B2B and subscription businesses. The company aims to mitigate the impacts of tariffs through production optimization and is pursuing qualitative growth strategies. LG is also maintaining its shareholder return program, signaling confidence in its future performance.
Executive Commentary
- Chang Tae Kim, CFO, emphasized, "We are laying the foundation for qualitative growth," highlighting the company’s strategic focus on sustainable development.
- The CFO also stated, "We will accelerate our transition to a customer-centric model," indicating a shift towards enhancing customer experiences.
Risks and Challenges
- U.S. tariff policy changes could impact profitability in certain segments.
- Geopolitical risks may affect global operations and supply chains.
- Weakening consumer sentiment could dampen demand for consumer electronics.
- Regional market conditions, such as the slowing housing market in North America, pose additional challenges.
Q&A
During the earnings call, analysts raised questions about the impact of U.S. tariffs on home appliances and explored LG’s AI and robotics strategy. The company also addressed inquiries regarding its data center cooling solutions and projected logistics and marketing expenses.
Overall, LG Electronics’ Q2 2025 results reflect a strong performance amid a complex global environment. The company’s strategic initiatives and focus on innovation continue to drive growth, positioning it well for future challenges.
Full transcript - LG Electronics Inc (066570) Q2 2025:
Won Jae Park, Investor Relations, LG Electronics: Good afternoon and welcome to LG Electronics quarterly earnings conference call. This conference call will begin with a presentation on the earnings results, followed by a Q and A session. To ask a question, please press star and one on your telephone keypad. Simultaneous English translation will be provided for the presentation, followed by consecutive interpretation for the Q and A. Now I’d like to turn the call over to the first speaker. Good afternoon. My name is Won Jae Park from Investor Relations. Thank you for joining our earnings call for the second quarter of 2025. With me are CFO and EVP of LG Electronics, Chang Tae Kim, SVP of HS Co. Lee Wong Kim, SVP of MS Co. Sang Ho Park, VP of VS Co. Choong-hyun Kim, VP of ES Co.
Dong Eun Shin, VP of Corporate Business Management, Joong Yeon Park, VP of Accounting, Hong-Su Lee, VP of Finance, Yeon Kyung Kim, and Head of ESG Strategy, Sung Min Hong. Today’s presentation will proceed as follows. Our CFO will begin by presenting our second quarter results and outlook for the third quarter of 2025, including our strategic direction for qualitative growth. Then, I’ll present the key financial highlights of the second quarter. Following that, each business will present its individual results and outlook. Finally, we will conclude with an overview of our ESG activities and achievements. Please note that all statements we make today regarding the financial result of the second quarter are subject to change in accordance with external review. Actual results may differ from today’s outlook and forward-looking statements due to market uncertainties and strategic changes.
Now, let us begin with the performance of the second quarter of 2025 and the outlook for the third quarter. Good afternoon.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): Hi.
Won Jae Park, Investor Relations, LG Electronics: I’m Chang Tae Kim, CFO of LG Electronics. Our consolidated Q2 financial results show ₩20.74 trillion in sales and ₩639.4 billion in operating profit. Q2 revenue declined year over year due to headwinds including U.S. tariff policy changes and geopolitical risks in the Middle East, which led to a delay in consumer sentiment recovery. Despite these challenges, we are laying the foundation for qualitative growth, particularly within our subscription services, online direct sales, and B2B segments. Operating profits declined year over year due to the increasing pressure of tariff-related cost, stagnant market demand for TVs, and intensified competition. On the other hand, we maintained last year’s profitability for some businesses while achieving year over year improvement for others through enhanced operational efficiency. U.S. tariff policies, weakening consumer sentiment, geopolitical risks, and ongoing uncertainties will likely continue into Q3.
Strong competition, higher marketing expenses, and price hikes due to derivative tariffs are pressuring the business to address these challenges. We will mitigate the impact of escalating U.S. tariff by employing various strategies including optimizing production across our global network. Additionally, we will strengthen our premium market position through region and segment-specific strategies while expanding into the mass market to secure sales growth momentum. We will continue pursuing qualitative growth by focusing on high growth areas within B2B such as automotive, electronics, and HVAC as well as on subscriptions and webOS to boost profitability. Mounting costs due to competition will be mitigated by improving our cost structure and operational efficiency to maintain stable profitability. I will now discuss the progress and plans for qualitative growth. LG Electronics is achieving meaningful results in establishing the foundation for qualitative growth central to our business portfolio transformation.
We expanded our B2B segment including automotive, electronics, HVAC, smart factory, and component solutions. We also maintained solid growth in D2C such as subscriptions and online direct sales. Furthermore, we are accelerating the growth of non-hardware businesses including the webOS platform, specialized care, and HVAC maintenance. Our success is built on strong long-term partnerships with B2B clients and direct relationships cultivated through our subscription services and online direct sales. This foundation provides a distinctive competitive advantage in a dynamic market, ensuring greater stability and profitability. Going forward, we will accelerate our transition to a customer-centric model by offering tailored solutions to foster customer loyalty and strengthen retention. Finally, we remain committed to enhancing corporate value through our shareholder return program. Yesterday, we announced the record date and amount of our interim dividend as well as the planned cancellation of treasury stock at the end of this month.
We are dedicated to enhancing value for both the company and our shareholders. Thank you. I’ll now briefly review the Q2 2025 performance of the enterprise-wide operations and each business. Our consolidated financial results for Q2 are ₩20.73 trillion in sales and ₩639.4 billion in operating profit. ATS recorded ₩6.59 trillion in sales and ₩439.9 billion in operating profit. MS recorded ₩4.39 trillion in sales and ₩191.7 billion in operating loss. VS recorded ₩2.84 trillion in sales and ₩126.2 billion in operating profit. Lastly, ES recorded ₩2.64 trillion in sales and ₩250.5 billion in operating profit. Since the Q1 2025 earnings release, we have highlighted the performance of our B2B and subscription businesses. These are key drivers of qualitative growth aligned with our portfolio transition initiative. In Q2, despite a slight quarter-over-quarter sales decline in commercial displays and chillers, our B2B segment sustained year-over-year sales growth.
This growth was driven by VS sales expansion, supported by a healthy order backlog and financial improvements within ES system AC business. The B2B segment contribution to overall sales also increased both quarter-over-quarter and year-over-year. Subscription services in Korea maintained strong sales growth of nearly 30% year-over-year, driven by differentiated care services. Our overseas subscription business also achieved both quarter-over-quarter and year-over-year sales growth, fueled by vigorous subscriber acquisition and portfolio expansion. Despite being in its early stages, the contribution of overseas subscriptions to total subscription sales also increased year-over-year as we accelerated business expansion. We will continue developing our business portfolio, including B2B and subscription services, to improve overall business performance. Moving on to the income statement and cash flow for Q2 reflecting financial income and expense, equity method, gain and loss, other non-operating income and expense, corporate income tax and income and loss from discontinued operation.
Net income for Q2 was ₩609.7 billion. As a result, first half net income attributable to controlling interest reached ₩1.40 trillion, up 36% year on year. Now let’s look at cash flow. Cash flow from operating activities was ₩1.54 trillion, and cash flow from investing activities was ₩185.7 billion, resulting in net cash flow of ₩1.51 trillion. When reflecting cash flow from financial activities of negative ₩921.4 billion, cash balance at the end of Q2 came to stand at ₩7.57 trillion, a ₩590.7 billion increase from the previous quarter. Key financial position and indicators for Q2 2025 are as follows. At the end of Q2, assets stand at ₩62.4 trillion, liabilities at ₩36.5 trillion and equity at ₩25.9 trillion. In terms of leverage ratios, liability to equity, debt to equity and net debt to equity all decreased quarter over quarter reflecting a healthy financial condition.
Now we will hear from each business company regarding its Q2 results and Q3 outlook. Beginning with HS company, here are the Q2 results for the HS business. Volatile U.S. trade policies and geopolitical risks in the Middle East have delayed consumer sentiment recovery. Despite these headwinds, we achieved year over year sales growth. This growth is driven by our two track strategy targeting both premium and volume segments coupled with the expansion of our online direct sales and subscription services. Despite rising tariff and freight cost, we maintained operating profit at a level comparable to the previous year. This was achieved through sales growth, manufacturing cost improvements, including production optimization and efficient marketing spend. Looking ahead to the third quarter, we anticipate a continued delay in the global appliance market recovery driven by ongoing uncertainty in U.S. trade negotiations and monetary policies in developed markets.
This environment will likely increase market competition. In response, we will launch region specific models, further strengthen our two track strategy to address market uncertainties and continue expanding our online direct sales and subscription services to maintain sales momentum. To mitigate the impact of U.S. tariff, we will work with distributors on price adjustment, optimize production locations for cost efficiency, and streamline logistics. Our goal is to achieve operating profit at or above last year’s levels. Let’s turn to our outlook for the global appliance market in 2025. We update this forecast twice a year in the first and second halves. By sharing our views, we aim to share our perspective on global demand trends and our corresponding strategies. Please note that this outlook focuses on combined market demand for refrigerators and washing machines, not our appliance revenue, which is influenced by factors such as regional market share and competition.
Actual market conditions may differ from this outlook due to various factors such as macroeconomic conditions. Forecasting appliance demand and its recovery trajectory is particularly challenging now given the uncertainty surrounding U.S. tariff policies and the rapidly evolving geopolitical landscape in advanced markets. Slowing housing market recovery and tariff-related price increases are expected to depress North American demand. A gradual recovery is expected in Europe, assuming the economy rebounds from its trough. Geopolitical factors will likely suppress demand in the Middle East and Africa this year, while Asia and India are projected to experience a turnaround and modest growth given ongoing uncertainties. We are closely monitoring market developments in the second half, including supply chain fluctuations, inflation, and interest rates. We are also working with sales channels to ensure timely demand sensing. Furthermore, our flexible global production network will help us maintain strong financial performance despite market challenges.
Let’s now turn to the Q2 results for our media solution. Business sales declined in Q2 compared to both the previous quarter and the same period last year due to market uncertainties which dampened consumer sentiment, stagnated hardware demand, and intensified competition. Operating profit deteriorated and was negative both quarter over quarter and year over year due to lower sales and increased competitive pressures. Our outlook for the third quarter is as follows. Improvements in consumer sentiment and hardware demand are unlikely given persistent geoeconomic uncertainties. Furthermore, competition is anticipated to heat up as Chinese brands, facing weakening domestic demand, aggressively expand into overseas markets. To address these challenges, we will focus on enhancing operational efficiency, strengthening the growth momentum of the webOS platform, and pursuing our Global South strategy to achieve qualitative growth.
I will now review the Q2 results of we as company sales grew both quarter over quarter and year over year, driven by increased orders from European OEMs and a stable order backlog. Operating profit also improved in both periods thanks to higher sales and ongoing cost optimization efforts. Regarding our Q3 outlook, global demand is expected to decline quarter over quarter due to uncertainties surrounding U.S. policies on EV subsidy and tariff risks. While acknowledging potential market headwinds, we will focus on strengthening OEM partnerships and optimizing operating expenses to minimize any negative effects on sales and maintain solid profitability. Let me outline the Q2 results of ES Company. Domestic sales maintained strong growth as we vigorously pursued seasonal demand for residential ACs and dehumidifiers and expanded subscription and online direct sales.
On the other hand, we experienced limited growth in overseas sales year over year due to uncertainties stemming from U.S. tariff policies. While domestic sales increased and certain overseas markets showed continued growth, operating profit dipped slightly year over year. This decline was primarily due to increased material and fixed cost. Looking ahead to the third quarter in the Korean market, we anticipate rising B2C demand for ACs fueled by a shorter rainy season and an early heat wave. The new government pro-consumption policies are also expected to provide a boost. However, we project continued softening in B2B demand due to ongoing stagnation in the construction industry. In overseas markets, we anticipate continued market uncertainty and potential demand contraction due to fluctuating tariff policies. To address these challenges in Korea, we will actively target the high efficiency AC replacement market, capitalizing on consumer demand for reduced energy cost.
We’ll also increase subscription sales by pursuing opportunities like government support for small business owners in overseas markets. We will closely monitor U.S. tariff policy development while further optimizing our production network, launching new models and expanding into new sales channels to drive growth. Finally, turning to our ESG activities and achievements, LG Electronics is continuously pursuing initiatives for carbon reduction and resource circulation. We are expanding our transition to renewable energy by implementing PPAs across 14 global production sites, including new solar projects at our plants in Haiphong, Vietnam, and Taiwan, Korea. Since 2022, we have partnered with the Ministry of Environment and E Circular Governance on Better Return, a public resource circulation campaign resulting in the collection of 108.3 tons of used batteries. To date, our eco-friendly products and technologies continue to gain recognition. Our OLED TVs have received Carbon Trust carbon footprint certification for five consecutive years.
We are also piloting a low carbon mineral wash project for Water Positive, partnering with the Korea Water Cluster and the Korea Water Forum to measure and verify water and energy savings when using detergents containing mineral wash. We strive to be a trusted partner for the market and our customers. In June, we published our 19th sustainability report outlining our progress and goals towards a better life for all. Our U.S. subsidiary earned its second consecutive Sustainability Brand Leader Award in the HVAC and Appliance categories from Green Builder Media, a leading North American green building publication. This highlights the trust we’ve built with home builders and consumers for our innovative eco-friendly solutions. As a smart life solution company, we remain committed to competitive and sustainable business practices. This brings us to the end of LG Electronics second quarter earnings release and the third quarter outlook for 2025.
We will now take questions. Operator, please commence with the Q&A session.
Operator: Now, Q and A session will begin. Please press Star one, that is Star and one, if you have any questions. Questions will be taken according to the order you have pressed the number one. For cancellation, please press Star two, that is Star and two on your phone. The first question will be provided by Dongwon Kim from KB Securities. Please go ahead with your question.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): Thank you for taking my question. My first question is for the HS division and the second question is for the MS division. My question for the HS division is how significant is the impact of U.S. tariff policies, including steel tariffs, on LG Electronics’ second quarter performance? How will the levies affect LG Electronics’ business performance and demand fluctuations in the second half of the year? If there are plans for price adjustments, to what extent will the prices be adjusted in response to increased costs? Could you elaborate on the price adjustment plans or status? Are there any new strategies being pursued beyond existing initiatives such as production site optimization? If so, could you please share the details?
My second question is on MS Company. I would like to ask the outlook of this year’s revenue and profitability. Along with this, I see some rising LCD panel prices and TV set price reductions. Is there any possibility of MS Business turning to an annual operating loss? It would also be appreciated if you can share your mid to long term profitability improvement plans including this year.
To answer your first question for the HS division, according to the Association of Home Appliance Manufacturers, home appliance shipments in the U.S. in the first half of the year maintained similar levels compared to the previous year. Some consumers have been rushing to make purchases before the tariffs take effect in the first half of 2025. We achieved approximately 3% growth year over year, higher than the market demand, with new product launches and efficient sales operations continuing to strengthen our market presence. Nonetheless, a rise in product costs driven by the 50% tariff on steel and reciprocal tariffs that are set to be applied in the latter half of the year could translate into greater uncertainties for the market price. Additionally, shifts in the U.S. Government’s trade policies and weakening consumer sentiment cast doubt on the demand outlook for home appliances. The effects of U.S.
tariffs began to be felt in the second quarter, but we were able to minimize the impact through preemptive inventory management and operations and cost cutting efforts. While the tariffs are expected to have a more pronounced impact in the latter half of the year, we intend to promptly navigate these challenges through preemptive response scenarios such as optimizing production sites and cutting costs. Price adjustments will be made after carefully considering multiple factors including shifts in U.S. tariffs and the competitive landscape and having discussions with distributors.
Won Jae Park, Investor Relations, LG Electronics: You saying.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): Regarding production site optimization, we will maintain our current supply system under universal tariffs, but also operate a product supply center throughout the U.S. to ensure competitive landed costs for washing machines. We plan to add a production site in Mexicali, Mexico in September to flexibly respond to the tariffs after countries reach tariff deals, and if reciprocal tariffs are imposed from August 1, we plan to increase the supply from our U.S. and Mexico production plants.
Let me answer your question about MS. Due to dampened consumer sentiment stemming from geopolitical risks and intensified competition, the business environment is expected to remain challenging throughout the year. At this point, it may be premature to forecast the full year results including the performance during the anticipated peak season in the second half. Therefore, I approach discussing potential improvements cautiously. However, we are actively implementing various initiatives aimed at enhancing profitability in order to see an overall improvement of financial performance of MS from the first half to the second half of the year.
About your question about profitability improvement plans, from a mid to long term perspective, we will continuously improve our profitability not only by launching market leading products that demonstrate technological leadership, but also by enhancing operational efficiency including strengthening cost competitiveness along with maximizing integrated synergy within synergy creation among TV, IT, ID business and value chain optimization, and also by expanding and strengthening the webOS ecosystem in order to build capabilities as a media and entertainment solutions provider. Next question please.
Operator: The following question will be presented by SK Kim from Daiwa Securities. Please go ahead with your question.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): Good afternoon. Thank you for taking my question. I have two questions, one for the VS division and the other for the company. My question for the VS division is what are the current operational status and future plans for the production plants in Mexico and Hungary? What are the expected quarterly sales from these plants?
My second question on corporate wide operations. Considering the recent favorable progress such as the early recovery of loans to LG Display, could you share more about the current status on your financial structure and future plans together?
First, let me answer your question on the VS division. LG Magna has established local production sites across various regions including Korea, China, Mexico, and Hungary, and is equipped with an operation system that can flexibly respond to fluctuations in our customers’ PSI. LG Magna’s Mexico plant started mass production in September 2023. As of the first quarter of 2025, the Mexico plant contributed to approximately mid 30% of LG Magna’s total sales. This upward trend will continue, with the sales percentage expected to reach a low 40% range by the fourth quarter of 2025.
Won Jae Park, Investor Relations, LG Electronics: Europe.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): LG Magna’s Hungary plant was established to reflect the localization needs of major European OEMs. The plant was completed as scheduled in December 2024, and full scale production is expected to begin in mid 2025.
Won Jae Park, Investor Relations, LG Electronics: Yeah, Won Jae Park.
Your question on corporate wide operations will be covered by Finance Division. As you just covered, during the first half of the year we saw improvements in our financial structure, evidenced by a decrease in our debt to equity ratio and liability to equity ratio as a result of improved equity method gain and loss, early collection of loans from sister company, and efforts to reduce loans payables. We will continue to expand efforts such as strengthening working capital management in the second half of the year so that we can maintain the stable and sound financial structure. Next question please.
Operator: The following question will be presented by Ji Han Hwang from NH Investment & Securities. Please go ahead with your question.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): The first question for the ES Division is could you provide an overview of the current sales and order status of the chiller business for data centers, including its contribution to the total ES Division sales? The second question is, if possible, could you share the progress on the discussions made with big tech companies as well as business opportunities and domestic data center projects?
My second question is on corporate-wide operations. I understand that you are trying to embed more of the AI to robots and edge AI and so on. Can you tell us more about your direction in the mid to long term? It would be appreciated if you can tell us more about the scale of investment.
First, to answer your questions on the ES Division, discussions are progressing with various partners in different regions regarding our data center business, and the performance of orders received has tripled year over year, showing rapid growth. While we cannot provide extensive details, we are currently advancing our cooling solutions to better meet the wide-ranging needs of our customers and have established a regular council with one of the global big tech firms, engaging in discussions to collaborate on a data center project. The discussions involve detailed specifications such as air cooling chillers, one of the highly efficient data center cooling solutions, and CDUs, a key component in chip cooling technology. While domestic data centers are securing various business opportunities, we ask for your understanding as we are unable to disclose the details of ongoing collaborations at this time.
Your question about AI will be covered by IR Division and I may cover a wide scope of AI as it’s not a common opportunity for us to talk about our AI solutions. In LG Electronics we define AI in two ways, AI for company and AI for customer. Firstly, in the AI for company domain we are actively developing various solutions targeting to achieve over 30% AI-driven efficiency gains within the next three years. In the AI for customer domain, we’re launching various new AI devices alongside ThinQ, pursuing diverse experimental initiatives and continuously enhancing the AI capabilities of our core appliances. For example, we are leading the market by delivering personalized customer experiences through the introduction of air conditioners equipped with AI spatial sensing technology and LLM-based voice control. LG Electronics is also deeply committed to protecting consumer privacy.
In our application of AI technologies, most sensing and contextual understanding relies on on-device AI. For tasks requiring external information retrieval and large-scale inference, we utilize a hybrid approach that incorporates cloud computing. Regarding the emerging field of humanoid robots, we see significant potential and opportunities in the home robotics sector. A key benefit of home robots lies in facilitating seamless interaction between appliances, end users, and as we have strengths in this area, we believe that we can leverage our extensive experience and expertise to tightly integrate our appliances with robotic platforms. We’re also securing business opportunities in AI-related downstream industries in the data center cooling solutions sector where we already possess industry-leading technology and product competitiveness. With our air-cooled chiller solutions, we have developed a high-efficiency liquid immersion cooling solution specifically designed for AI data centers with commercialization targeted this year.
Won Jae Park, Investor Relations, LG Electronics: Open Innovation.
In addition to this, we are actively investing in R&D operations and infrastructure related to AI and robotics. We are strengthening our capabilities through a various approach encompassing in-house development, open innovation, and venture investments in robotics. Specifically, we’re accelerating the growth of our commercial robotics business through our acquisition of Bear Robotics. Furthermore, we plan to bolster our technological and business capabilities in industrial robotics by integrating this with our smart factory initiatives within our Production Engineering Research Institute, or PRI. Next question please.
Operator: The following question will be presented by Sung Soo Yang from Meritz Securities. Please go ahead with your question.
Won Jae Park, Investor Relations, LG Electronics: Panyangan.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): Good afternoon. Thank you for taking my question. I have two questions, one for the HS division and the other for the ES division. My first question for the HS division is what are the projections for logistics costs, marketing expenses, etc. in the second half of 2025? Against this backdrop, what are the sales and operating profit projections for 2025? My second question for the ES division is how is the shifting trend towards liquid immersion cooling and data center cooling solutions expected to impact the chiller business? Could you share the progress of the development of new cooling solutions such as liquid immersion cooling and future plans?
Won Jae Park, Investor Relations, LG Electronics: Amit.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): First, let me answer your question for the HS Division. For logistics costs, we expect to see improvements in the second half of 2025 compared to both the first half of the year and the previous year. This is driven by the recent finalization of the global sea freight bidding contract for volumes to be shipped in the latter half of the year, coupled with the overall downward trend in sea freight rates from July. We are also strategically mixing new carriers and existing carriers to further enhance our cost competitiveness. Additionally, we are mitigating the impact of U.S. tariffs by shipping sales volume in advance and increasing the level of regional production for marketing expenses. While the second half of the year presents various business dynamics and external variables, we plan to maintain and strengthen our market position through optimizing resources.
This will be achieved by focusing on customer communication and strategic marketing supported by our unique core technologies, differentiated premium products with AI features, and regionally tailored products. The business environment in 2025 continues to be riddled with numerous challenges including shifts in U.S. tariff policies and weakened global consumer sentiment. Regardless, LG Electronics will continue to boost sales with the two track strategy tailored to each market and expansion of online and subscription businesses. Furthermore, we project the operating profit to improve year over year with strengthened efforts to minimize the impact of U.S. tariffs and optimization of overhead expenses including logistics and marketing costs. Now let me answer your question for the ES Division.
LG Electronics’ chiller business is rapidly expanding its market presence and continues to have robust orders and strong sales fueled by demand for high efficiency cooling solutions in various sectors such as large buildings, nuclear power plants, and data centers. We are recognized as industry leaders offering best-in-class products and expertise for general Internet data centers. As we expect to see increased demand in the data center market, we have developed both air cooling chillers and liquid cooling cold chip cooling solutions with commercialization targeted at the end of the year. In the future, immersion cooling is expected to be widely adopted in AI data centers as the technology boasts high cooling efficiency. In light of this, we are actively developing immersion cooling technology, collaborating with leading companies in the field to prepare for the shifting technological demands of the market.
I’m General. Next question please.
Operator: Currently there are no participants with questions. Please press Star, 1, Star and 1 to give your question. Currently there are no participants with questions. We will wait for a second until there is another question.
Won Jae Park, Investor Relations, LG Electronics: Operator.
Unidentified Speaker, Various Questioners, Various (KB Securities, Daiwa Securities, NH Investment & Securities, Meritz Securities): This brings us to the end of LG Electronics earnings release conference call for the second quarter of 2025. For further questions, please contact the IR team. Thank you.
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