LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on February 28, 2018, submits the audited separate financial statements for LG Display Co., Ltd. for the fiscal years ended December 31, 2017, and December 31, 2016. The company is a global manufacturer of Thin Film Transistor Liquid Crystal Display (TFT-LCD) and Organic Light Emitting Diode (OLED) panels and modules. Operations include manufacturing plants in Korea, China, Poland, and Vietnam. The financial statements were audited by Samjong Accounting Corporation (KPMG), which issued an unqualified opinion.
Key Financial Metrics (FY 2017 vs. FY 2016)
| Item (in millions of KRW) | FY 2017 | FY 2016 |
|---|---|---|
| Revenues | 25,591,082 | 24,419,295 |
| Operating Income | 1,536,730 | 709,138 |
| Net Income | 1,779,721 | 967,078 |
| Operating Margin | 6.0% | 2.9% |
| Net Margin | 6.9% | 4.0% |
| Total Assets | 25,409,415 | 21,812,750 |
| Total Liabilities | 11,580,156 | 9,577,303 |
| Shareholders' Equity | 13,829,259 | 12,235,447 |
| Net Cash from Operating Activities | 4,271,814 | 1,719,626 |
| Net Cash Used in Investing Activities | (4,264,371) | (1,833,514) |
| Net Cash from Financing Activities | 299,498 | 265,311 |
| Earnings Per Share (Basic) | W 4,974 | W 2,703 |
Material Changes vs. Prior Period
- Profitability Surge: Operating income more than doubled, increasing by 116.7% to W 1.54 trillion, driven by improved gross profit (up 45% to W 3.87 trillion) despite higher selling and administrative expenses.
- Revenue Growth: Total revenue increased by 4.8% to W 25.59 trillion.
- Capital Expenditure: Significant increase in investing outflows, with acquisitions of property, plant, and equipment rising to W 4.86 trillion (from W 2.55 trillion), reflecting heavy investment in manufacturing capacity.
- Cash Flow: Net cash provided by operating activities more than doubled to W 4.27 trillion, indicating strong operational efficiency.
- Balance Sheet: Total assets grew by 16.5%, primarily due to increases in property, plant, and equipment (up 42.6%) and investments.
Guidance, Outlook, Risks, and Unusual Items
Management Commentary & Outlook: The filing does not contain forward-looking guidance or specific management commentary regarding future quarters. The focus is on the historical performance of FY 2017.
Accounting Changes & Risks:
- New Standards Adoption: The company plans to adopt K-IFRS No. 1109 (Financial Instruments) and K-IFRS No. 1115 (Revenue from Contracts with Customers) effective January 1, 2018. Management expects no significant impact from K-IFRS 1109, but K-IFRS 1115 is expected to increase refund liabilities and assets for returned goods by approximately W 9.8 billion.
- Legal Proceedings: Several patent infringement cases (e.g., with Delaware Display Group and Surpass Tech Innovation) were settled or dismissed in 2017. An anti-trust litigation with Argos Limited reached a settlement in principle in December 2017.
- Financial Risk: The company is exposed to currency risk (primarily USD and JPY) and interest rate risk. A 5% weakening of the Won against the USD would increase profit by approximately W 88.6 billion.
- Related Party Transactions: Significant transactions occurred with LG Electronics Inc. (a major shareholder owning 37.9%) and various subsidiaries, including sales of W 1.68 trillion to LG Electronics Inc. in 2017.
Key Facts for Investor Verification
- Capital Intensity: Verify the return on the massive W 4.86 trillion capital expenditure in 2017, particularly regarding new OLED and LCD production lines.
- Related Party Dependence: Assess the concentration risk associated with sales to LG Electronics Inc. and other LG Group affiliates, which accounted for a significant portion of total revenue.
- Debt Structure: Review the maturity profile of the W 4.22 trillion in borrowings and bonds, noting the mix of fixed and variable rate instruments.
- Accounting Transition: Monitor the impact of the upcoming adoption of K-IFRS 1115 on revenue recognition and refund liabilities in the 2018 reporting period.
- Dividend Policy: Note the consistent cash dividend of W 500 per share (10% yield) paid in 2017, totaling W 178.9 billion.