LG Display Co., Ltd. - Q1 2022 Financial Summary
Business Context and Reporting Period
This Form 6-K filing covers the consolidated quarterly report for LG Display Co., Ltd. for the period ended March 31, 2022. The company is a global leader in the research, development, and manufacture of display technologies, primarily OLED and TFT-LCD panels. The reporting period reflects a challenging market environment characterized by declining average selling prices (ASPs) for display panels, particularly in the mobile and LCD sectors, despite high production utilization rates.
Key Financial Metrics (Consolidated K-IFRS)
| Metric | Q1 2022 | Q1 2021 | Full Year 2021 |
|---|---|---|---|
| Revenue | W 6,471 billion | W 6,883 billion | W 29,878 billion |
| Gross Profit | W 818 billion | W 1,232 billion | W 5,305 billion |
| Operating Profit | W 38 billion | W 523 billion | W 2,231 billion |
| Net Profit (Consolidated) | W 54 billion | W 266 billion | W 1,334 billion |
| Net Profit (Attributable to Owners) | W 20 billion | W 228 billion | W 1,186 billion |
| Operating Cash Flow | W 695 billion | W 962 billion | N/A |
| Total Assets | W 38,267 billion | N/A | W 38,155 billion |
| Total Liabilities | W 23,510 billion | N/A | W 23,392 billion |
| Net Borrowings to Equity Ratio | 61% | N/A | 57% |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased by approximately 6% compared to Q1 2021, driven by a drop in average selling prices and seasonal fluctuations in mobile product shipments.
- Profitability Compression: Operating profit fell significantly to W 38 billion from W 523 billion in Q1 2021. This sharp decline is attributed to the decrease in ASPs (down ~18% per square meter from Q4 2021) and rising raw material costs.
- Inventory Build-up: Inventories increased to W 4,230 billion from W 3,350 billion at the end of 2021, reflecting production levels exceeding sales volume in the current market conditions.
- Raw Material Costs: Costs for key raw materials rose significantly compared to Q1 2021: electrolytic galvanized iron (+49.2%), polymethyl methacrylate (+12.6%), and copper (+17.8%).
- Foreign Exchange Impact: The company recognized a hedging loss of W 22 billion reclassified to revenue, impacting the reported revenue figure.
Guidance, Outlook, and Risks
- Investment Strategy: Management plans to maintain capital expenditures within EBITDA limits in 2022, though total CAPEX is expected to increase compared to 2021 (W 3.2 trillion in 2021) to expand differentiated product capacity, specifically OLED.
- Market Outlook: The company anticipates continued volatility in the display panel market due to supply-demand imbalances. However, it expects growth in high-end segments, including large-sized OLED TVs, gaming displays, and automotive panels.
- Risks:
- Cyclicality: The industry remains highly cyclical; if supply exceeds demand, ASPs may continue to decline.
- Raw Materials: Continued price increases in raw materials (iron, copper, petrochemicals) due to global supply constraints and geopolitical factors.
- Foreign Exchange: Profit margins are sensitive to exchange rate fluctuations between the USD, JPY, CNY, and KRW.
- Legal Proceedings: The company is a defendant in antitrust-related lawsuits in the UK, Israel, and US, though management does not believe these will have a material financial effect.
Key Facts for Investor Verification
- Customer Concentration: The top 10 customers accounted for 85% of total sales revenue in Q1 2022, indicating high dependency on a few major global set makers.
- Convertible Bonds: The company has outstanding unsecured foreign convertible bonds (No. 3) with a principal amount of approximately W 813 billion, maturing in August 2024.
- Production Utilization: Despite the revenue decline, production facilities in Gumi, Paju, and Guangzhou operated at 100% utilization in Q1 2022.
- Dividend Policy: No cash dividends were declared for Q1 2022. The last cash dividend was paid for the fiscal year 2021.
- Accounting Changes: The company adopted amendments to K-IFRS No. 1016 regarding proceeds before intended use for PPE, which was applied retrospectively to 2021 and 2020 data.