Business Context and Reporting Period
Company: LG Display Co., Ltd.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter 2016 (ended March 31, 2016)
Filing Date: April 27, 2016
Business Overview: LG Display is a leading innovator of display technologies (TFT-LCD, OLED, flexible displays) manufacturing panels for TVs, notebooks, desktops, mobile devices, and tablets. Operations include fabrication facilities in Korea and China, with back-end assembly in Korea, China, and Poland.
Key Financial Metrics (Q1 2016)
| Item (KRW Billion) | Q1 2016 | Q4 2015 | Q1 2015 |
|---|---|---|---|
| Revenues | 5,989 | 7,496 | 7,022 |
| Operating Income | 40 | 61 | 744 |
| Income Before Tax | -8 | 31 | 624 |
| Net Income | 1 | -14 | 476 |
| EBITDA | 853 | 882 | 1,595 |
Liquidity and Debt (as of March 31, 2016):
- Liability-to-Equity Ratio: 77%
- Current Ratio: 153%
- Net Debt-to-Equity Ratio: 15%
Material Changes vs. Prior Periods
- Revenue: Decreased 20.1% quarter-over-quarter (QoQ) and 14.7% year-over-year (YoY). The decline is attributed to panel oversupply and falling prices.
- Operating Income: Decreased 34.8% QoQ and 94.7% YoY. Despite the drop, the company recorded its 16th consecutive quarter of operating profit.
- Net Income: Turned positive at KRW 1 billion compared to a net loss of KRW 14 billion in Q4 2015, but represents a 99.8% YoY decrease from KRW 476 billion.
- Revenue Mix: TV panels accounted for 38% of revenue, followed by tablets/notebook PCs (24%), mobile devices (23%), and desktop monitors (15%).
Outlook, Management Commentary, and Risks
Management Strategy: To counter market difficulties, LG Display reduced manufacturing of TV panels 30-inches and below while expanding production of 40-inch and 60-inch+ panels. The company is focusing on premium differentiated products using M+ technology and optimizing production allocation between IT and TV panels.
Guidance and Outlook (Q2 2016):
- Shipments: Expected to increase by a mid-single digit percentage compared to Q1.
- Pricing: Panel prices are expected to stabilize due to global sports events and increased new product shipments.
- Focus: Continued concentration on Ultra HD TV panels and manufacturing process improvements to maximize efficiency.
Risks and Contingencies:
- Market volatility driven by panel oversupply and price fluctuations.
- Forward-looking statements regarding Q2 performance are subject to inherent risks and uncertainties; actual results may differ materially.
Key Facts for Investor Verification
- Verify the sustainability of the 16th consecutive quarter of operating profit amidst a 95% YoY decline in operating income.
- Confirm the impact of the strategic shift away from small TV panels (30" and below) on future revenue mix and margins.
- Monitor Q2 panel shipment volumes and pricing trends to validate management's "mid-single digit" growth and price stabilization forecasts.
- Review the stability of the balance sheet given the 77% liability-to-equity ratio in a capital-intensive industry.