Business Context and Reporting Period
Company: LG Display Co., Ltd.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Fourth Quarter 2017 (ended December 31, 2017)
Filing Date: January 23, 2018
Business Overview: Global leader in display technologies (TFT-LCD and OLED) for TVs, mobile devices, and IT applications. The company operates manufacturing facilities in Korea and China, with back-end assembly in Korea, China, Poland, and Vietnam.
Key Financial Metrics (Q4 2017)
| Item (KRW Billion) | Q4 2017 | Q3 2017 | Q4 2016 |
|---|---|---|---|
| Revenues | 7,126 | 6,973 | 7,936 |
| Operating Income | 45 | 586 | 904 |
| Income Before Tax | 44 | 599 | 1,065 |
| Net Income | 44 | 477 | 825 |
| EBITDA | 930 | 1,420 | 1,623 |
Liquidity and Leverage (as of Dec 31, 2017):
- Liability-to-Equity Ratio: 95%
- Current Ratio: 117%
- Net Debt-to-Equity Ratio: 15%
Material Changes vs. Prior Periods
- Revenue: Increased 2% quarter-over-quarter (QoQ) due to seasonal increases in large-size LCD and OLED TV panel shipments. Decreased 10% year-over-year (YoY).
- Profitability: Operating income plummeted 92% QoQ and 95% YoY. Net income fell 91% QoQ and 95% YoY.
- EBITDA: Declined significantly from KRW 1,420 billion in Q3 2017 to KRW 930 billion in Q4 2017.
- Revenue Mix: TV panels accounted for 40% of revenue, mobile devices 28%, tablets/notebooks 18%, and desktop monitors 14%.
Outlook, Management Commentary, and Risks
Management Commentary:
- Despite a 95% YoY drop in Q4 operating profit, the company achieved a record annual operating profit of KRW 2.5 trillion for 2017, surpassing KRW 1 trillion for the fifth consecutive year.
- Success was driven by a differentiated product mix (large-size UHD TV panels, high-end IT panels) and industry-leading technologies.
- OLED business solidified with 1.7 million annual TV panel shipments and the start of operations at the E5 production line for small/mid-size OLED panels.
- Dividend declared: KRW 500 per common share (subject to shareholder approval in March 2018).
Guidance and Outlook:
- Q1 2018: Panel area shipments expected to decrease by a high-single digit percentage due to low seasonality.
- Prices: Downward trend anticipated to continue but expected to stabilize by the end of Q1 2018.
- 2018 Strategy: Accelerating shift to an OLED-focused business structure with planned investments of approximately KRW 9 trillion.
Risks and Contingencies:
- Continued decline in panel prices and intensified global competition.
- Unfavorable foreign exchange rates impacting profitability.
- Pre-emptive expenses in marketing and R&D for OLED expansion.
- One-off expenses impacting Q4 results.
Key Facts for Investor Verification
- Verify the sustainability of the KRW 9 trillion investment plan for OLED expansion in 2018 and its impact on future cash flows.
- Confirm the timeline for panel price stabilization as predicted by management for the end of Q1 2018.
- Monitor the execution of the E5 production line ramp-up and its contribution to revenue mix.
- Assess the impact of foreign exchange fluctuations on future earnings given the company's global operations.
- Review the final approval of the KRW 500 per share dividend at the Annual General Meeting in March 2018.