LPL

LG Display Co., Ltd. - Form 6-K Summary

Business Context and Reporting Period

This Form 6-K, filed on February 28, 2019, submits the audited consolidated financial statements for LG Display Co., Ltd. and its subsidiaries for the fiscal years ended December 31, 2018, and December 31, 2017. The company manufactures and sells Thin Film Transistor Liquid Crystal Display (TFT-LCD) and Organic Light Emitting Diode (OLED) panels and modules. Operations are located in South Korea, China, Poland, and Vietnam. The financial statements were audited by Samjong Accounting Corporation (KPMG) and received an unqualified opinion.

Key Financial Metrics (FY 2018 vs. FY 2017)

Note: All figures are in millions of Korean Won (KRW) unless otherwise stated.

Material Changes vs. Prior Period

• Profitability Collapse: The company reported a net loss of KRW 179.4 billion in 2018, a sharp reversal from a net profit of KRW 1.94 trillion in 2017. Operating income plummeted by approximately 96% to KRW 92.9 billion.
• Revenue Decline: Total revenues decreased by 12.4% to KRW 24.3 trillion, driven by declines in TV, desktop monitor, and mobile product sales.
• Increased Leverage: Total liabilities increased by 29% to KRW 18.3 trillion. Borrowings (including bonds) rose significantly from KRW 5.6 trillion to KRW 8.6 trillion, causing the net borrowings to equity ratio to jump from 15% to 41%.
• Impairment Charges: Significant impairment losses were recognized on property, plant, and equipment (KRW 43.6 billion) and investments in equity-accounted investees (KRW 17.4 billion), including write-downs for CYNORA GmbH and Nanosys Inc.
• Foreign Exchange Impact: The company recorded a net foreign currency loss of KRW 59.8 billion in non-operating expenses, compared to a net loss of KRW 219.8 billion in 2017, though exchange rate fluctuations contributed to a KRW 19.9 billion loss in other comprehensive income.

Guidance, Outlook, and Risks

The filing does not contain specific forward-looking financial guidance or management commentary regarding future earnings projections. However, the following risks and contingencies are noted:

• Impairment Risk: The auditor identified the assessment of impairment of non-current assets (including goodwill of KRW 104.3 billion) as a key audit matter due to the significant judgment required in estimating future cash flows.
• Deferred Tax Assets: The recoverability of deferred tax assets (KRW 308.4 billion from tax credit carryforwards) is a key audit matter, dependent on future taxable income estimates.
• Asset Disposal: The company plans to dispose of a portion of tangible assets of LG Display Poland Sp. z o.o., classified as non-current assets held for sale (KRW 70.2 billion), with completion expected in the first half of 2019.
• Legal Proceedings: An anti-trust litigation filed by Argos Limited was settled in November 2018. The company is defending against various other claims but has not recognized provisions for them.
• Customer Concentration: The top ten end-brand customers accounted for 77% of sales in 2018, indicating high concentration risk.

Investor Verification Checklist

• Verify the sustainability of the operating margin recovery given the 96% drop in operating income.
• Assess the impact of the increased debt load (KRW 8.6 trillion) on future interest expenses and liquidity.
• Review the assumptions used in the impairment testing for goodwill and non-current assets, as these are highly judgmental.
• Monitor the progress of the asset disposal in Poland and its impact on cash flows.
• Confirm the realization of deferred tax assets given the current loss position.
• Track the performance of major customers (top 10 representing 77% of sales) to assess revenue stability.