LG, whose record net profit was below analysts' forecasts, predicted revenues would dip in the third quarter as consumer demand eased, and its chief financial officer said the global slowdown could last up to 18 months.

"We are cautious about the outlook for the second half," said CFO David Jung. "We have seen the impact of the slowdown on our orders since June."

Many analysts said the April-June quarter would represent a peak for the year.

"There are several risks in the second half of the year to 2009, which are the global downturn of the mobile phone market and the weakening display market due to a supply glut," said Jason Kang, analyst at Daewoo Securities.

LG, the world's fourth-largest mobile maker, said it expected mobile phone margins and shipments to fall in the third quarter, although margins should remain above 10 percent.

Its second-quarter operating profit margin on handsets was 14.4 percent on a global basis, a historical high and better than 13.9 percent in the first.

LG, which owns 38 percent of LG Display Co Ltd (034220.KS: Quote, Profile, Research), benefited from another banner quarter at the world's No.2 liquid crystal display (LCD) maker, which more than trebled quarterly net profit from a year ago on strong demand for flat-screen panels for TVs and computer monitors.

But flat panel prices are set to fall this quarter with the LCD market in oversupply, LG told an investor meeting.

"LG Electronics is the largest shareholder in LG Display, and a gloomy outlook for the display industry is making prospects much weaker," said John Park, an analyst at Daishin Securities.

LG posted April-June net profit of 707 billion won ($696.5 million) versus 385 billion won a year ago. It missed a forecast for 802 billion won by 10 analysts surveyed by Reuters due to losses related to foreign exchange debt and higher taxes.

Operating profit on a global basis climbed to a record 856 billion won from 464 billion won, slightly beating expectations.

Quarterly revenue on a global basis rose 22 percent to 12.7 trillion won.

Shares in LG, valued at more than $16 billion, closed up 4.1 percent at 113,500 won after jumping almost 7 percent before the earnings announcement, outpacing the wider market's 3.5 percent gain.

SECOND-HALF RISKS

LG, which ranks below Nokia (NOK1V.HE: Quote, Profile, Research), Samsung Electronics (005930.KS: Quote, Profile, Research) and Motorola (MOT.N: Quote, Profile, Research) in making mobiles, sold a record 27.7 million phones in the second quarter, versus 24.4 million in January-March.

"If (Apple's (AAPL.O: Quote, Profile, Research)) iPhone sells more than expected, LG Electronics is going to face a situation where it will have to cut its high-end cellphone prices," Park said.

LG's results offer a strong contrast to smaller rival Sony Ericsson (6758.T: Quote, Profile, Research) (ERICb.ST: Quote, Profile, Research), which on Friday posted a small quarterly operating loss, hit hard by a fall in demand for its more expensive phones, and predicted a tough road ahead.

However, Nokia on Friday slightly raised its forecast for the mobile phone industry, saying volume would grow 10 percent or more this year, easing fears that the economic slowdown was hitting phone demand.

LG's display division, which makes plasma panels and TV sets, posted a 1 percent profit margin on a global basis after suffering heavy losses for most of the past year.

Despite concerns about the second half, LG is expected to put in a strong performance for the whole year, thanks to a weaker won currency that makes its exports more competitive. Full-year net profit is forecast to more than double to 2.53 trillion won, according to Reuters Estimates.

LG shares fell 6.7 percent in April-June against the KOSPI's 1.7 percent fall, amid growing concerns over the global economy.