LG Display Co., Ltd. Q1 2013 Financial Summary
Business Context and Reporting Period
This Form 6-K filing covers the quarterly period from January 1, 2013, to March 31, 2013. LG Display Co., Ltd. is a global manufacturer of TFT-LCD and OLED display panels. The company operates production facilities in Paju and Gumi, Korea, with subsidiaries in the Americas, Europe, and Asia. The financial statements are prepared in accordance with Korean International Financial Reporting Standards (K-IFRS).
Key Financial Metrics (Consolidated)
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Revenue | WON 6,803 billion | WON 6,184 billion |
| Gross Profit | WON 704 billion | WON 328 billion |
| Operating Profit | WON 151 billion | WON (211) billion (Loss) |
| Net Profit (Loss) | WON 3.5 billion | WON (129) billion (Loss) |
| Operating Margin | 2.2% | (3.4%) |
| Net Cash from Operating Activities | WON 1,226 billion | WON 651 billion |
| Total Assets | WON 24,086 billion | WON 24,456 billion (Dec 2012) |
| Total Liabilities | WON 13,741 billion | WON 14,215 billion (Dec 2012) |
| Debt-to-Equity Ratio | 133% | 139% (Dec 2012) |
Material Changes vs. Prior Period
- Turnaround to Profitability: The company returned to profitability in Q1 2013, reporting a net profit of WON 3.5 billion, compared to a net loss of WON 129 billion in Q1 2012. Operating profit improved from a loss of WON 211 billion to a profit of WON 151 billion.
- Revenue Growth: Revenue increased by approximately 10% year-over-year, driven by higher sales volumes in notebook, monitor, and television panels.
- Margin Expansion: Gross profit margin improved significantly to 10.4% from 5.3% in the prior year, aided by cost reduction measures and a shift in product mix.
- Foreign Exchange Impact: The company recognized significant foreign currency gains (WON 329 billion) in non-operating income, partially offset by foreign currency losses (WON 346 billion) in non-operating expenses. Net foreign exchange impacts were volatile but manageable.
- Capital Expenditures: Cash used in investing activities was WON 1,486 billion, primarily for the acquisition of property, plant, and equipment to expand OLED and LTPS production capacities.
Guidance, Outlook, and Risks
- Capital Expenditure Plan: Management expects 2013 capital expenditures to be no more than WON 4 trillion on a cash out basis, or between WON 4 trillion and WON 4.5 trillion on a delivery basis. Funds will target OLED and LTPS panel expansion.
- Market Risks: The TFT-LCD industry remains highly cyclical with intense competition. Average selling prices (ASPs) declined approximately 4% in Q1 2013 compared to Q4 2012 due to seasonal demand shifts and product mix changes. Management notes that ASPs may continue to decline over time.
- Legal Contingencies: The company faces ongoing antitrust investigations and litigation in multiple jurisdictions (US, EU, Korea, etc.) regarding alleged anti-competitive activities in the LCD industry. While provisions have been established, actual losses could differ materially from estimates. Notable settlements include a USD 400 million fine with the US DOJ and a EUR 215 million fine with the European Commission.
- Patent Litigation: The company is engaged in patent infringement proceedings with Samsung Display and others, though mediation efforts are underway to resolve these disputes.
Investor Verification Checklist
- Antitrust Exposure: Verify the status of ongoing antitrust investigations in the US, EU, and Korea, and assess the adequacy of current provisions against potential fines.
- ASP Trends: Monitor the trajectory of average selling prices for LCD panels, as continued declines could compress margins despite cost-cutting efforts.
- Foreign Exchange Sensitivity: Review the company's hedging strategies given the significant exposure to USD and JPY fluctuations, which heavily impacted non-operating income/expense.
- Capital Allocation: Track the execution of the planned WON 4 trillion+ capital expenditure program, specifically the ramp-up of OLED and LTPS facilities.
- Customer Concentration: Note that the top ten end-brand customers accounted for 78% of sales in Q1 2013, creating significant concentration risk.