LG Electronics Inc. (KRX:066570) reported its best quarter ever in the three months to June. Revenue was ₩23,826.5bn and operating income ₩1,579.1bn, a 6.6% margin. Three earlier pieces here covered the half-year inflection, the buyback, and the gap between operating and net income. This one takes the quarter apart by division. The divisions did not earn the record evenly, and one division got help.
The company reports four divisions plus a set of subsidiaries and adjustments. Korean press coverage of the July 30 results gives the divisional figures. My view is that the appliance margin, which is the number the market cheered, is about four points lower than it looks once a one-time tariff refund comes out, and that the durable story in the quarter is the two smaller divisions underneath it.
The company calls its home appliances division HS. It made ₩7,075.7bn of revenue and ₩685.9bn of operating income. That is a 9.7% margin, and press coverage called it nearly 10% and a record. Operating income rose 47% year on year.
The air conditioning and heating division is ES. It made ₩2,726.1bn of revenue and ₩235.8bn of operating income. That is an 8.6% margin. This is the division that sells cooling to data centres, and revenue grew on overseas air conditioner sales.
The vehicle components division is VS. It made ₩3,025.9bn of revenue and ₩191.2bn of operating income. That is a 6.3% margin. Revenue rose 6.2% and operating income 51.5%. Both were records for the division.
The television and media division is MS. It made ₩5,114.6bn of revenue and ₩219.4bn of operating income. That is a 4.3% margin. A year earlier the same division lost about ₩190bn. The swing is roughly ₩410bn.
Add the four together and you get ₩17,942.3bn of revenue and ₩1,332.3bn of operating income. The remaining ₩5,884.2bn of revenue and ₩246.8bn of operating income includes LG Innotek. That is the component subsidiary the company consolidates. Other units and eliminations also make up the remainder.
The US government refunded about ₩300bn in the quarter. The company had paid those tariffs on exports the previous year. Korean press coverage places the refund in the appliance division, where the tariffs were paid. It says the company stated operating income would have risen sharply even without it.
Take the refund out and the appliance division earned about ₩386bn on ₩7,075.7bn, a 5.5% margin. That is a good quarter for a white-goods maker, better than Whirlpool has managed recently, and not a record. Group operating income without the refund is about ₩1,279bn and the margin is 5.4%.
For context, the full-year operating margin at LG Electronics has never exceeded 6.7%, which was FY2020. The first half of 2026 was 6.8% as reported. Without the refund it is about 6.2%. That is still the best half on file. It just isn't the step-change the headline number suggested.
I'm not accusing the company of anything. It disclosed the refund and said the quarter was strong without it. The point is that an investor extrapolating a 9.7% appliance margin into the second half will be disappointed, because the refund was cash the company had already lost and got back, not a new level of profitability.
The two divisions that don't carry a refund are the ones that tell you where the company is going.
The heating and cooling division at 8.6% is now the second-highest-margin business in the group. It has the clearest demand tailwind. Data-centre operators need chillers, and the division sells them. Revenue of ₩2,726.1bn in a single quarter is more than the vehicle division made two years ago.
Vehicle components at 6.3% has taken a decade to get there. The division carried losses through most of the 2010s while it built an order book with global automakers. Operating income up 51.5% on revenue up 6.2% means the division is now earning on contracts it won years ago. The margin is still below the appliance business, but the direction is one way.
The television division's ₩410bn swing is the hardest to read. Press coverage attributes it to premium OLED launches and disciplined inventory. Television margins at LG have swung between loss and mid-single-digit profit for years. A single 4.3% quarter is not evidence that the swing has stopped.
The refund was for tariffs already paid. The company still pays them. On its third-quarter 2025 call it estimated annual US tariff costs at about ₩600bn. The exposure sits in the appliance division. It ships refrigerators and washing machines into the US from Korea, Mexico and its own Tennessee plant.
The response has been to move production. The company opened a refrigerator plant in Mexicali, Mexico, in October 2025. It added washing machine capacity in Mexico. It has said it is optimising production sites to reduce the tariff hit. Goods made in Mexico that meet the regional content rules of the North American trade agreement enter the US without the tariff. The steel-derivative tariff is 50% on appliances containing imported steel. It was announced in mid-2025. The Mexico moves are meant to avoid that specific line.
None of this appears in the DART statements as a separate cost. It appears in the gap between the gross margin the company earns in the US and the gross margin it would earn without the duty. That duty is 50% on the steel in a washing machine. Consolidated gross margin was 27.7% in the June quarter, up from 25.0% a year earlier. Some of that improvement is the refund. Some is the production shift starting to work. The disclosures don't let me separate them.
The company's market capitalisation was ₩32.8 trillion at Friday's close of ₩201,500. Book equity was ₩31,917.6bn at June 30, so the shares trade at about 1.0 times book. First-half net income was ₩1,786.4bn, which annualises to a multiple of about 9 times.
The stock is 49% below its 52-week high of ₩392,500 and 2.7 times its low of ₩75,100. Whatever moved it to that high was not the appliance margin. An earlier piece here noted that when it found the buyback paid rising prices through the spring.
At book value, the market is paying for the company as it is. It gives little for the heating and vehicle divisions growing into the profit line. That seems cautious. The refund muddies the quarter. It doesn't muddy the direction of the two divisions that didn't get one.
The appliance margin without the refund could be lower than 5.5% if the refund was larger than ₩300bn or if some of it landed elsewhere. The company hasn't published an exact figure, and I've used the press estimate.
The heating and cooling tailwind depends on data-centre construction continuing at its current pace. A slowdown in AI capital spending would hit the division's order book within two quarters.
The vehicle division's margin depends on automaker production. Its largest customers are exposed to the same US tariff regime that Kia and Hyundai are fighting.
And the fourth quarter, which an earlier piece here showed to be where LG's profits go to die, is still ahead. A ₩300bn refund in the second quarter does not change the fourth-quarter pattern. That quarter turned ₩135bn of operating income into a ₩1.1tn pretax loss two years ago.
The third-quarter results in late October will show the appliance margin without a refund. Above 7% would mean the mix shift toward premium and the Mexico production moves are producing a structurally higher margin. Near 5% would mean the June quarter's record was borrowed from the US Treasury.
The second number is the heating and cooling division's revenue. A third consecutive quarter above ₩2.5tn would put it on a ₩10tn annual pace. That would make it a business large enough to be valued on its own.
kstock reads DART every morning and writes up what moved — the contract, the buyback, the number that does not add up. The daily post and a Saturday roundup, by email.