LG Display Co., Ltd. Q2 2019 Earnings Summary
Business Context and Reporting Period
This Form 6-K reports unaudited consolidated financial results for LG Display Co., Ltd. for the second quarter of 2019 (ended June 30, 2019), filed on July 23, 2019. The company is a global leader in display technologies, manufacturing TFT-LCD and OLED panels for TVs, mobile devices, and other applications.
Key Financial Metrics
| Metric (KRW Billion) | Q2 2018 | Q1 2019 | Q2 2019 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Revenues | 5,611 | 5,879 | 5,353 | -9% | -5% |
| Operating Income | -228 | -132 | -369 | N/A | N/A |
| Income Before Tax | -340 | -129 | -442 | N/A | N/A |
| Net Income | -301 | -63 | -550 | N/A | N/A |
| EBITDA | 681 | 679 | 458 | -33% | -33% |
Liquidity and Leverage (as of June 30, 2019):
- Liability-to-Equity Ratio: 142%
- Current Ratio: 88%
- Net Debt-to-Equity Ratio: 61%
Material Changes and Drivers
Revenues declined 5% year-over-year and 9% quarter-over-quarter. The decrease is attributed to macroeconomic uncertainty, specifically the U.S.-China trade war, which led to conservative behavior by set makers and retailers, weakening panel demand and prices.
The operating loss widened significantly to KRW 369 billion from KRW 132 billion in Q1 2019. Management cited one-off expenses incurred to strengthen capabilities in the mobile sector and prepare for future business shifts.
Revenue mix by product category in Q2 2019:
- TV Panels: 41% (up 5 percentage points, driven by OLED sales)
- Tablets and Notebook PCs: 22%
- Desktop Monitors: 18%
- Mobile Devices: 19%
Outlook, Guidance, and Strategic Initiatives
Management expects a positive outlook for large-sized OLED business in Q3 2019, driven by the Guangzhou OLED fab starting production, which will nearly double OLED production capacity. A new POLED fab in Paju, Korea, is also expected to begin mass production soon.
Key strategic developments include:
- Additional Investment: KRW 3 trillion investment into the Gen 10.5 OLED line at the P10 fab in Paju.
- Automotive Expansion: Launch of new POLED-based automotive products in the latter half of 2019.
- Business Structure: Continued shift toward an OLED-focused structure; large-scale OLED investments initiated in 2017 are expected to conclude in 2019.
Investor Verification Checklist
- Verify the impact of the KRW 3 trillion additional investment on future cash flow and debt levels.
- Confirm the timeline for the Guangzhou and Paju fab ramp-up and its effect on Q3/Q4 revenue.
- Assess the sustainability of the 41% revenue share from TV panels given the volatility in the trade war environment.
- Review the specific nature of the "one-off expenses" contributing to the widened operating loss.
- Monitor the net debt-to-equity ratio trend as the company transitions its business structure.