Business Context and Reporting Period
Company: LG Display Co., Ltd.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter 2018 (Ended March 31, 2018)
Filing Date: April 25, 2018
Context: The company reported unaudited consolidated financial results based on K-IFRS. The quarter was characterized by a strategic structural transformation toward OLED business, offset by weak demand and declining prices in the LCD panel market.
Key Financial Metrics
| Item (KRW Billion) | Q1 2018 | Q4 2017 | Q1 2017 |
|---|---|---|---|
| Revenues | 5,675 | 7,126 | 7,062 |
| Operating Income | -98 | 45 | 1,027 |
| Income Before Tax | -96 | 44 | 858 |
| Net Income | -49 | 44 | 679 |
| EBITDA | 812 | 930 | 1,743 |
Liquidity and Debt (as of March 31, 2018):
- Liability-to-Equity Ratio: 102%
- Current Ratio: 104%
- Net Debt-to-Equity Ratio: 22%
Revenue Mix by Product:
- TV Panels: 43%
- Mobile Devices: 22%
- Tablets and Notebook PCs: 19%
- Desktop Monitors: 16%
Material Changes vs. Prior Periods
Revenue: Decreased 20% year-over-year (YoY) and 20% quarter-over-quarter (QoQ). The decline is attributed to low seasonality, conservative purchasing by set makers, and a continued decline in LCD panel prices due to expected supply increases from Chinese manufacturers.
Profitability: The company swung from an operating profit of KRW 1,027 billion in Q1 2017 to an operating loss of KRW 98 billion in Q1 2018. Net income turned into a net loss of KRW 49 billion, compared to KRW 679 billion in the prior year.
EBITDA: Declined significantly to KRW 812 billion from KRW 1,743 billion in Q1 2017.
Debt Levels: Liability-to-equity and net debt-to-equity ratios increased compared to the previous quarter. Management attributes this to advance borrowings to fund the strategic shift toward an OLED-focused business structure and to hedge against anticipated global interest rate hikes.
Guidance, Outlook, and Management Commentary
Management Commentary: CFO Don Kim stated that while market conditions changed rapidly, they remain within prepared scenarios. The company is focusing on efficient capital expenditure management and intensified cost reduction. Despite the overall loss, OLED profitability improved due to R&D efforts, validating the strategic shift.
Outlook:
- Q2 Expectations: Panel area shipments are expected to grow starting in Q2, driven by the trend toward larger-size panels ahead of major sporting events.
- Product Demand: Demand for large-size OLED panels is expected to remain strong.
- Price Trends: LCD panel prices are expected to stabilize in Q2.
- Strategic Focus: Continued emphasis on differentiated products, specifically Crystal Sound OLED (CSO) and Wallpaper OLED panels.
Risks and Contingencies: The filing includes a standard forward-looking statement disclaimer, noting that actual results may differ materially due to inherent risks and uncertainties. Specific risks cited include rapid market changes, exchange rate fluctuations, and competitive pressures from Chinese panel makers.
Key Facts for Investor Verification
- Profitability Reversal: Verify the sustainability of the operating loss given the sharp decline in LCD prices and the timeline for OLED profitability to offset LCD losses.
- Debt Strategy: Confirm the specific terms and usage of the new borrowings taken to fund the OLED transition and assess the impact of rising global interest rates on future interest expenses.
- Price Stabilization: Monitor Q2 data to confirm management's expectation that LCD panel prices will stabilize and that demand for large-size OLEDs will remain robust.
- Unaudited Status: Note that the Q1 2018 financial data is unaudited and subject to change.