LG Display Co., Ltd. - Form 6-K Summary (Semi-Annual Report)
Business Context and Reporting Period
Company: LG Display Co., Ltd.
Reporting Period: Six months ended June 30, 2020 (H1 2020).
Filing Date: August 14, 2020.
Business Overview: LG Display is a global leader in the research, development, manufacture, and sale of display panels, utilizing TFT-LCD and OLED technologies. The company operates production facilities in Korea (Paju, Gumi) and China (Guangzhou, Nanjing, Yantai, etc.). The business is reported as a single segment.
Key Financial Metrics (Consolidated K-IFRS)
| Metric | H1 2020 | H1 2019 | Full Year 2019 |
|---|---|---|---|
| Revenue | W 10,031 billion | W 11,232 billion | W 23,476 billion |
| Gross Profit | W 406 billion | W 1,114 billion | W 1,868 billion |
| Operating Loss | (W 879 billion) | (W 501 billion) | (W 1,359 billion) |
| Net Loss | (W 703 billion) | (W 613 billion) | (W 2,872 billion) |
| Net Loss Attributable to Owners | (W 688 billion) | (W 609 billion) | (W 2,830 billion) |
| Loss Per Share (Basic) | (W 1,923) | (W 1,703) | (W 7,908) |
| Total Assets | W 35,054 billion | W 35,575 billion | W 35,575 billion |
| Total Liabilities | W 22,953 billion | W 23,086 billion | W 23,086 billion |
| Net Borrowings to Equity Ratio | 91% | 81% | 81% |
Note: All figures in billions of Won (W) unless otherwise noted. H1 2019 figures are for the six-month period ended June 30, 2019.
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased by approximately 10.7% compared to H1 2019, driven by a significant drop in TV panel sales (down ~37.7% year-over-year) despite growth in IT and Mobile segments.
- Widening Losses: Operating loss increased from W 501 billion in H1 2019 to W 879 billion in H1 2020. This was primarily due to lower gross margins and continued high depreciation and R&D expenses.
- Product Mix Shift: While TV panel revenue declined, revenue from Notebook/Tablet panels increased by ~1.0% and Mobile panels increased by ~15.1% compared to H1 2019, reflecting demand shifts due to the COVID-19 pandemic (remote work/online classes).
- Average Selling Price (ASP): The ASP per square meter increased by approximately 15% in Q2 2020 compared to Q1 2020, attributed to increased sales of IT products.
- Capital Expenditure Reduction: Management plans to reduce capital expenditures in 2020 to slightly above W 3 trillion, roughly half of the W 7 trillion spent in 2019, as major investments in large OLED and plastic OLED technologies are nearing completion.
Guidance, Outlook, and Risks
- Strategic Focus: The company is transitioning its business to center around OLED, focusing on premium products like "Cinematic Sound" and "Wallpaper" OLED panels. It is expanding capacity for 8.5th and 10.5th generation OLED panels.
- Market Risks: The display industry is highly cyclical and capital-intensive. LG Display faces risks from structural oversupply, particularly from Chinese manufacturers, and volatility in average selling prices. Margins are sensitive to price declines that outpace cost reductions.
- Foreign Exchange: Sales are primarily denominated in U.S. dollars, while costs are in Won and Yen. The company uses derivative contracts (swaps) to hedge currency and interest rate risks.
- Legal Proceedings: The company is a defendant in antitrust litigation in the UK, Israel, and the US, as well as patent infringement lawsuits by Solas OLED Ltd. in the US and Germany. Management does not believe these will have a material effect on financial conditions, but outcomes are uncertain.
- Environmental & Safety: The company faces ongoing compliance costs related to greenhouse gas emissions and environmental regulations. Several minor fines were paid in 2017-2020 for safety and environmental violations, with corrective measures implemented.
Key Facts for Investor Verification
- Customer Concentration: The top ten customers accounted for 83% of total sales revenue in H1 2020 (up from 78% in H1 2019). Two specific customers ("A" and "B") each accounted for more than 10% of sales.
- Convertible Bonds: The company has outstanding Unsecured Foreign Convertible Bonds No. 3 with a principal amount of approximately W 813 billion (USD 687.8 million), maturing in August 2024. These are classified as financial liabilities at fair value through profit or loss.
- Dividend Policy: No cash or stock dividends were paid in H1 2020, 2019, or 2018 due to accumulated losses.
- Related Party Transactions: Significant transactions occur with LG Electronics Inc. (37.9% shareholder) and its subsidiaries, as well as LG Group affiliates (e.g., LG Chem, Silicon Works). Sales to LG Electronics and its subsidiaries were substantial.
- Impairment Charges: The company recognized an impairment loss of W 30.5 billion on intangible assets and W 9.3 billion on property, plant, and equipment during H1 2020.