LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on February 28, 2019, submits the audited separate financial statements of LG Display Co., Ltd. for the fiscal years ended December 31, 2018, and December 31, 2017. The company is a global manufacturer of Thin Film Transistor Liquid Crystal Display (TFT-LCD) and Organic Light Emitting Diode (OLED) panels. The financial statements were audited by Samjong Accounting Corporation (KPMG), which issued an unqualified opinion.
Key Financial Metrics (FY 2018 vs. FY 2017)
| Metric (KRW Millions) | FY 2018 | FY 2017 |
|---|---|---|
| Revenues | 22,371,687 | 25,591,082 |
| Operating Income (Loss) | (472,995) | 1,536,730 |
| Net Income (Loss) | (442,291) | 1,779,721 |
| Total Assets | 27,062,106 | 25,409,415 |
| Total Liabilities | 13,849,525 | 11,580,156 |
| Shareholders' Equity | 13,212,581 | 13,829,259 |
| Net Cash from Operating Activities | 3,685,474 | 4,271,814 |
| Net Cash Used in Investing Activities | (5,493,181) | (4,264,371) |
| Net Cash from Financing Activities | 1,714,582 | 299,498 |
Note: All figures are in millions of Korean Won (KRW). Margins are not explicitly stated as percentages in the filing text; however, the shift from positive operating income to a loss indicates a significant margin contraction.
Material Changes vs. Prior Period
- Profitability Reversal: The company reported a net loss of KRW 442.3 billion in 2018, a stark contrast to the net profit of KRW 1.78 trillion in 2017. Operating income swung from a profit of KRW 1.54 trillion to a loss of KRW 473.0 billion.
- Revenue Decline: Total revenues decreased by approximately 12.6% year-over-year, dropping from KRW 25.59 trillion to KRW 22.37 trillion.
- Increased Capital Expenditure: Net cash used in investing activities increased significantly to KRW 5.49 trillion (from KRW 4.26 trillion), driven largely by acquisitions of property, plant, and equipment totaling KRW 5.55 trillion.
- Debt Expansion: Total liabilities increased by KRW 2.27 trillion. Non-current financial liabilities rose from KRW 3.17 trillion to KRW 5.14 trillion, reflecting increased long-term borrowings and bond issuances.
- Impairment Charges: The company recognized impairment losses on property, plant, and equipment of KRW 43.6 billion and on various investments (associates) totaling approximately KRW 23.1 billion.
Guidance, Outlook, Risks, and Unusual Items
- Accounting Policy Changes: The company adopted K-IFRS No. 1115 (Revenue from Contracts with Customers) and K-IFRS No. 1109 (Financial Instruments) effective January 1, 2018. The adoption of K-IFRS 1115 resulted in the recognition of a refund liability and an asset for the right to recover returned goods, though it had no significant impact on the opening balance of retained earnings.
- Key Audit Matters: Auditors highlighted the impairment of non-current assets (specifically goodwill and property, plant, and equipment) and the assessment of the recoverability of deferred tax assets (KRW 308.4 billion) as key audit matters due to the significant judgment required in estimating future cash flows and taxable income.
- Contingencies: The company settled an anti-trust litigation with Argos Limited in November 2018. No provisions were recognized for other pending legal proceedings as the company does not believe a present obligation exists.
- Future Standards: The company plans to adopt K-IFRS No. 1116 (Leases) on January 1, 2019, which will require recognizing right-of-use assets and lease liabilities for operating leases. Management expects the impact to be not significant when practical expedients are applied.
- Dividends: No cash dividends were paid in 2018. The company paid dividends of KRW 178.9 billion in 2017.
Investor Verification Checklist
- Cash Flow Sustainability: Verify the ability to service increased debt levels (Total liabilities to equity ratio rose to 105%) given the operating loss and heavy capital expenditure.
- Impairment Adequacy: Review the assumptions used for the "value in use" calculations regarding goodwill (KRW 72.6 billion) and non-current assets to ensure they reflect current market conditions.
- Deferred Tax Assets: Assess the probability of realizing KRW 308.4 billion in deferred tax assets from tax credit carryforwards, given the current loss position.
- Related Party Transactions: Examine the significant volume of sales (KRW 19.5 trillion) and purchases with subsidiaries and LG Electronics Inc. to understand dependency on the LG Group ecosystem.
- Lease Accounting Impact: Monitor the impact of the upcoming K-IFRS 1116 adoption on the balance sheet and leverage ratios in the 2019 reporting period.