LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K reports the Quarterly Report of LG Display Co., Ltd. for the period from January 1, 2011, to September 30, 2011. The company is a global leader in the research, development, manufacture, and sale of display panels, primarily focusing on TFT-LCD and OLED technologies. Operations are centered in Paju and Gumi, Korea, with subsidiaries in the U.S., Europe, and Asia. The financial statements are prepared in accordance with Korean International Financial Reporting Standards (K-IFRS).
Key Financial Metrics (Consolidated K-IFRS)
Amounts in millions of Won unless otherwise noted.
| Metric | 9 Months Ended Sept 30, 2011 | 9 Months Ended Sept 30, 2010 |
|---|---|---|
| Revenue | 17,681,311 | 19,028,172 |
| Operating Profit (Loss) | (779,601) | 1,697,470 |
| Net Profit (Loss) | (781,641) | 1,427,606 |
| Basic EPS (Won) | (2,170) | 3,987 |
| Net Cash from Operating Activities | 2,183,726 | 3,147,213 |
| Total Assets (Sept 30, 2011) | 24,774,110 | 23,857,658 (Dec 31, 2010) |
| Total Liabilities (Sept 30, 2011) | 14,591,298 | 12,796,691 (Dec 31, 2010) |
| Liabilities to Equity Ratio | 143% | 116% (Dec 31, 2010) |
Material Changes vs. Prior Period
- Profitability Reversal: The company reported a significant shift from profitability to a net loss. Operating profit swung from a gain of 1.7 trillion Won in the prior year to a loss of 780 billion Won in the current period. This was driven by a decline in average selling prices (ASPs) of LCD panels and increased costs.
- Revenue Decline: Consolidated revenue decreased by approximately 7% year-over-year to 17.7 trillion Won.
- ASP Pressure: The average selling price of LCD panels per square meter decreased by 5% in Q3 2011 compared to Q2 2011, reflecting intense industry competition and capacity expansion.
- Capital Expenditures: The company estimated capital expenditures for 2011 to be slightly in excess of 4.0 trillion Won to expand production capacity, including the P83 facility which commenced mass production in March 2011.
Guidance, Outlook, Risks, and Contingencies
- Antitrust Litigation (Critical Risk): The company is facing significant legal and financial risks related to global antitrust investigations regarding alleged price-fixing in the TFT-LCD industry.
- U.S. DOJ: Pleaded guilty in 2008 to a Sherman Act violation, agreeing to a $400 million fine (payments ongoing).
- European Commission: Imposed a fine of EUR 215 million in December 2010; the company is appealing.
- Korea Fair Trade Commission: Indicated on October 28, 2011, that it would impose a fine, though a final decision was pending at the time of filing.
- Class Actions: The company is a defendant in numerous federal class actions in the U.S. and Canada. A settlement with the direct purchaser class was preliminarily approved in October 2011, but trials for indirect purchasers are scheduled for 2012.
- Market Risks: The TFT-LCD industry is highly cyclical and capital-intensive. The company faces risks from declining ASPs, currency fluctuations (sales in USD, costs in Won/JPY), and rapid technological obsolescence.
- Outlook: Management continues to invest in new technologies (3D, touch screens, flexible displays) and capacity expansion to maintain market share, despite current margin compression.
Key Facts for Investor Verification
- Antitrust Liability Exposure: Verify the final amount of fines imposed by the Korea Fair Trade Commission and the status of the European Commission appeal, as actual liabilities may differ materially from current provisions.
- Class Action Settlements: Monitor the outcome of the indirect purchaser class action trial scheduled for April 2012 and any new settlements.
- ASP Trends: Track the average selling price of LCD panels to assess if the 5% Q3 decline is a temporary fluctuation or a sustained downward trend impacting future margins.
- Capital Allocation: Review the utilization of the estimated 4.0 trillion Won capital expenditure budget and the return on investment for new facilities like P83 and P98.
- Currency Hedging: Assess the effectiveness of the company's hedging strategies given the significant exposure to USD, JPY, and CNY fluctuations.