LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
Company: LG Display Co., Ltd.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2022 (Q1-Q3 2022)
Filing Date: November 14, 2022
Business Overview: LG Display is a global leader in the research, development, and manufacture of display technologies, primarily OLED and TFT-LCD panels. The company serves global set makers for television, IT (monitors, notebooks, tablets), and mobile products. Overseas sales accounted for approximately 97% of total sales in the period.
Key Financial Metrics (Consolidated K-IFRS)
| Metric (Millions of KRW) | 9 Months Ended Sep 30, 2022 | Full Year 2021 |
|---|---|---|
| Revenue | 18,850,153 | 29,878,043 |
| Gross Profit | 1,144,153 | 5,305,000 (approx) |
| Operating Profit (Loss) | (1,209,305) | 2,230,608 |
| Net Profit (Loss) | (1,101,784) | 1,333,544 |
| Net Profit (Loss) Attributable to Owners | (1,174,075) | 1,186,182 |
| Basic EPS (KRW) | (3,281) | 3,315 |
| Total Assets | 40,133,950 | 38,154,515 |
| Total Liabilities | 25,850,347 | 23,392,014 |
| Net Borrowings to Equity Ratio | 84% | 57% |
Note: Revenue figures exclude a hedging loss of W152.7 billion reclassified from accumulated other comprehensive income.
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased by approximately 37% compared to the full year 2021, driven by a downturn in the global display market and reduced demand for IT and TV panels.
- Operating Loss: The company reported a significant operating loss of W1.21 trillion, a sharp reversal from the W2.23 trillion operating profit in 2021. This was primarily due to declining average selling prices (ASPs) and high fixed costs.
- Inventory Build-up: Inventories increased to W4.52 trillion from W3.35 trillion at the end of 2021, reflecting a buildup of finished goods and work-in-process amid slowing demand.
- Convertible Bond Redemption: The company redeemed a significant portion of its Unsecured Foreign Convertible Bonds No. 3. USD 667 million was repaid upon bondholders' exercise of a put option in August 2022, and the remaining balance was repaid in October 2022 following the company's exercise of a call option.
- FX Impact: Significant foreign currency losses were recognized, though partially offset by gains on the valuation of derivative instruments (W588 billion net gain on FX derivatives).
Guidance, Outlook, and Risks
- Strategic Focus: Management is transitioning the business structure to center around OLED, which has strong growth potential. The company is focusing on differentiated products like "OLED.EX," "Cinematic Sound," and "Wallpaper" displays for TVs, and expanding plastic OLED capacity for smartphones and automotive uses.
- Investment Plan: Capital expenditures in 2022 are expected to be within the level of depreciation and amortization costs, a reduction from the W3.2 trillion spent in 2021.
- Market Risks: The display industry is highly cyclical and sensitive to macroeconomic conditions. Competition is intensifying, particularly from Chinese manufacturers in the TFT-LCD sector. Profit margins remain vulnerable to exchange rate fluctuations (USD, JPY, CNY) and raw material price volatility.
- Legal Proceedings: The company is a defendant in three separate civil lawsuits regarding alleged anticompetitive behavior (follow-on damages claims in the UK, Israel, and US). Management does not believe these will have a material effect on financial conditions, but outcomes are uncertain.
- Environmental/Safety: The company faces ongoing regulatory scrutiny regarding safety incidents and environmental compliance, with several fines and improvement orders issued in 2020-2022. A criminal trial is pending regarding a 2021 chemical leakage incident.
Key Facts for Investor Verification
- Customer Concentration: The top ten customers comprised 85% of total sales revenue in the first nine months of 2022. Three specific customers (A, B, and C) each accounted for more than 10% of sales.
- Convertible Bond Status: Verify the full repayment of the USD 687.8 million convertible bond issue (No. 3) which was largely redeemed in late 2022, impacting future interest obligations and potential dilution.
- Inventory Valuation: Monitor the W4.52 trillion inventory balance for potential future write-downs given the cyclical downturn and declining ASPs in the display market.
- FX Hedging Effectiveness: Review the impact of the W152.7 billion hedging loss reclassified to revenue and the W588 billion net gain on FX derivatives to understand the true exposure to currency fluctuations.
- Related Party Transactions: Significant transactions exist with LG Electronics (largest shareholder, 37.9% ownership) and other LG Group affiliates, including sales of goods and purchases of raw materials.