LG Display Co., Ltd. - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K filing, dated November 14, 2013, contains the translated Quarterly Report of LG Display Co., Ltd. for the nine-month period ended September 30, 2013. The company is a leading global manufacturer of display panels, primarily utilizing TFT-LCD and OLED technologies. Operations are concentrated in Paju and Gumi, Korea, with significant manufacturing and sales subsidiaries in China, the Americas, Europe, and Asia. The company operates as a single reporting segment focused on the manufacture and sale of display and display-related products.
Key Financial Metrics (Consolidated K-IFRS)
Period: Nine months ended September 30, 2013 (in millions of Won, unless otherwise noted)
- Revenue: 19,954,023
- Operating Profit: 906,363
- Profit for the Period: 348,157
- Profit Attributable to Owners: 354,576
- Basic Earnings Per Share: 991 Won
- Net Cash Provided by Operating Activities: 2,981,531
- Total Assets: 22,346,203
- Total Liabilities: 11,693,212
- Total Equity: 10,652,991
- Debt Profile: Borrowings (including bonds) totaled approximately 4,008,521 million Won. The net borrowings to equity ratio was 13%.
Material Changes vs. Prior Period
Compared to the nine months ended September 30, 2012:
- Revenue: Decreased by approximately 3.5% (from 20,687,093 million Won to 19,954,023 million Won).
- Profitability: The company returned to profitability. Operating profit increased significantly from 325,087 million Won to 906,363 million Won. Profit for the period improved from a loss of 83,383 million Won to a profit of 348,157 million Won.
- Product Mix & Pricing: The average selling price of LCD panels per square meter increased by approximately 3% in Q3 2013 compared to Q2 2013, driven by an improved product mix with higher shipments of small-to-medium sized products.
- Market Share: Worldwide market share for large-sized TFT-LCD panels (9 inches or larger) was 28.1% for the nine months ended September 30, 2013, compared to 28.4% in 2012.
Guidance, Outlook, Risks, and Contingencies
Outlook and Strategy: Management expects capital expenditures in 2013 to be approximately 4 trillion Won (cash out basis) or 3 trillion Won (delivery basis), primarily funding OLED and LTPS-based panel production expansions. The company is focusing on high-end products, including Ultra HD, large OLED, and flexible displays, to differentiate from competitors.
Risks:
- Market Cyclicality: The TFT-LCD industry is highly cyclical. Margins are sensitive to fluctuations in average selling prices, which can decline due to supply-demand imbalances.
- Foreign Exchange: Sales are primarily denominated in U.S. dollars, while costs are in Won and Yen. A stronger Won could negatively impact profit margins.
- Competition: Intense competition from Samsung Display, AU Optronics, and Chinese manufacturers (BOE, CSOT) pressures pricing and margins.
Contingencies and Legal Matters:
- Antitrust Investigations: The company is subject to ongoing investigations and litigation regarding alleged anti-competitive activities in the LCD industry in the U.S., Europe, Korea, and other jurisdictions. While a $400 million fine was paid to the U.S. DOJ in 2008 and a EUR 215 million fine was imposed by the European Commission in 2010 (currently under appeal), significant class action lawsuits and individual claims remain pending. Management has established provisions but notes that actual losses could differ materially.
- Patent Litigation: The company is involved in various patent disputes, including a recent settlement with Samsung Display in September 2013 where both parties withdrew infringement litigations. Other cases, such as those involving Anvik Corporation and ITRI, remain in various stages of appeal or investigation.
Investor Verification Checklist
- Verify the status and potential financial impact of pending antitrust class action lawsuits in the U.S. and Canada, as well as the outcome of the European Commission fine appeal.
- Monitor the average selling price trends for LCD panels, particularly for large-sized TV panels, to assess margin sustainability.
- Review the progress and capital requirements of the new eighth-generation facility in Guangzhou, China (LG Display (China) Co., Ltd.), where the company holds a 70% interest.
- Assess the impact of foreign exchange rate fluctuations (USD/KRW and JPY/KRW) on future earnings, given the company's significant exposure.
- Confirm the timeline for the mass production and commercial success of next-generation technologies, specifically OLED and flexible displays, as a key growth driver.