LG Electronics, South Korea's second-largest mobile-phone maker, returned to profit in the third quarter on earnings from handset sales and higher demand for home appliances.

Net income was 157.1 billion won (€100 million) in the three months ended September 30, compared with a loss of 413.9 billion won a year earlier, Seoul-based LG said in a statement today.

LG Electronics shares rose the most in more than a month in Seoul after the phone business, the world's fifth-biggest, unexpectedly posted a profit in the quarter.

The company is counting on its Optimus line of smartphones running Google's Android operating system to compete with Apple's iPhone and Samsung's Galaxy devices, while cutting production of cheaper handsets.

"The biggest factor was their handset business returning to profit," Park Kang Ho, a Seoul-based analyst at Daishin Securities, said.

"We thought their mobile business would at best break even. The overall product mix has improved and margins got better."

LG rose 2.2 per cent to 74,600 won in Seoul trading as of 1.40pm., while South Korea's benchmark Kospi index lost 0.4 per cent.

Mobile Profit LG's mobile division had a third-quarter profit of 21.5 billion won, compared with a 138.8 billion won loss a year earlier, the statement said.

Sales at the division fell 11.4 per cent to 2.4 trillion won.

The company probably sold 6.9 million smartphones in the third quarter, compared with 4.4 million units a year earlier, according to an estimate by KTB Investment and Securities.

The company aims to ship 30 million to 35 million smartphones this year.

LG can meet the target even after estimated shipments through the first half lagged behind expectations, Park Jong Seok, head of the mobile-phone business, said September 18.

The company last month began selling the Optimus G smartphone, which features a 4.7-inch screen and a processor made by Qualcomm to operate on fourth-generation Long Term Evolution, or LTE, networks that offer faster Internet connections.

Bloomberg