LG Display Co., Ltd. Q1 2019 Financial Summary
Business Context and Reporting Period
This Form 6-K filing covers the consolidated quarterly report for LG Display Co., Ltd. for the period from January 1, 2019, to March 31, 2019. The company operates as a single reporting segment focused on the research, development, manufacture, and sale of display panels utilizing TFT-LCD and OLED technologies. Major production facilities are located in Paju and Gumi (Korea) and Guangzhou (China).
Key Financial Metrics (Consolidated K-IFRS)
| Metric | Q1 2019 | Q1 2018 | Full Year 2018 |
|---|---|---|---|
| Revenue | W 5,879 billion | W 5,675 billion | W 24,337 billion |
| Gross Profit | W 633 billion | W 542 billion | W 3,085 billion |
| Operating Profit (Loss) | (W 132 billion) | (W 98 billion) | W 93 billion |
| Net Profit (Loss) | (W 63 billion) | (W 49 billion) | (W 179 billion) |
| Net Loss Attributable to Owners | (W 61 billion) | (W 59 billion) | (W 207 billion) |
| EPS (Basic) | (W 170) | (W 166) | (W 579) |
| Total Assets | W 35,388 billion | N/A | W 33,176 billion |
| Total Liabilities | W 20,098 billion | N/A | W 18,289 billion |
| Net Borrowings to Equity Ratio | 54% | N/A | 41% |
Note: Figures are in billions of Won unless otherwise noted. Q1 2018 data is provided for comparison where available in the text.
Material Changes vs. Prior Period
- Revenue Growth: Consolidated revenue increased by approximately 3.6% year-over-year to W 5.88 trillion, driven by growth in tablet and mobile product segments.
- Operating Loss: The company reported an operating loss of W 132 billion, an increase from the W 98 billion loss in Q1 2018. This was primarily due to increased R&D expenses and selling/administrative costs.
- Product Mix Shift: Average selling prices for LCD panels decreased by 5.5% compared to Q4 2018 due to seasonal influences on small and medium-sized panels. However, the company is actively shifting its mix toward higher-value OLED products.
- Accounting Policy Change: The company adopted K-IFRS No. 1116 (Leases) effective January 1, 2019, recognizing right-of-use assets and lease liabilities on the balance sheet for the first time.
Outlook, Risks, and Management Commentary
- Strategic Focus: Management is prioritizing the transition to OLED-centric business models, focusing on premium products like "Crystal Sound" OLED and "Wallpaper" displays. Investments are continuing in 8.5th and 10.5th generation OLED production lines.
- Market Risks: The display industry remains highly cyclical and sensitive to supply/demand imbalances. Structural oversupply concerns persist, particularly from Chinese manufacturers, which puts downward pressure on average selling prices.
- Customer Concentration: The top ten end-brand customers accounted for 80% of sales in Q1 2019. Two specific customers ("A" and "B") each accounted for more than 10% of sales revenue.
- Legal Proceedings: The company is a defendant in four separate civil lawsuits regarding alleged anticompetitive behavior (cartel claims). Management does not believe these will have a material effect on financial conditions, but outcomes remain uncertain.
- Subsequent Event: On April 30, 2019, the company issued USD 100 million in unsecured floating-rate notes maturing in April 2023.
Key Facts for Investor Verification
- Profitability Trend: Verify the sustainability of the operating loss given the continued decline in LCD panel prices and the timeline for profitability in the new OLED production lines.
- Customer Dependency: Assess the risk associated with the top two customers representing a significant portion of revenue and the potential impact of losing these contracts.
- Capital Expenditures: Review the heavy investment plan for 2019 (following W 7.9 trillion in 2018) to ensure cash flow can support the transition to OLED without excessive leverage.
- Legal Exposure: Monitor the status of the four pending antitrust lawsuits in the UK, Israel, and US for any material judgments.
- Accounting Impact: Understand the impact of the new lease accounting standard (K-IFRS 1116) on reported assets, liabilities, and operating expenses.