LG Display Co., Ltd. — FY2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022; filed April 27, 2023. This is an annual report, not a standalone Q4 filing. Financial statements are prepared under IFRS as issued by the IASB and presented on a consolidated basis in Korean won (₩).
Business context and financial performance
LG Display manufactures TFT-LCD and OLED panels for IT products, televisions, mobile devices, automotive displays and other applications. OLED accounted for approximately 40% of 2022 revenue. The company reported a global revenue market share of approximately 20% for panels of nine inches or larger.
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | ₩26.152 trillion in IFRS statements; management’s comparable discussion presents ₩26.365 trillion before a ₩213 billion hedge-loss deduction | ₩29.878 trillion |
| Gross profit / margin | ₩1.124 trillion / 4.3% | ₩5.305 trillion / 17.8% |
| Operating result | K-IFRS operating loss: ₩2.085 trillion | K-IFRS operating profit: ₩2.231 trillion |
| Loss before tax | ₩3.433 trillion | Profit before tax: ₩1.719 trillion |
| Net income (loss) | Loss of ₩3.196 trillion; basic loss per share ₩8,584 | Profit of ₩1.334 trillion; basic earnings per share ₩3,315 |
| Cash from operating activities | ₩3.011 trillion | ₩5.753 trillion |
| Capital expenditure cash outflow | ₩5.079 trillion | ₩3.141 trillion |
IFRS statements do not show operating profit or loss as a separate line item; the operating results above are disclosed under K-IFRS in the filing’s presentation-of-information discussion.
Liquidity, debt and cash flow
- Cash and cash equivalents were ₩1.825 trillion at year-end, down from ₩3.542 trillion. Bank deposits were ₩1.723 trillion, including ₩1.455 trillion of restricted deposits.
- Current assets of ₩9.444 trillion and current liabilities of ₩13.962 trillion produced a working-capital deficit of ₩4.518 trillion, versus a ₩808 billion deficit in 2021.
- Borrowings and bonds totaled ₩14.991 trillion at year-end, before lease liabilities and certain other items. The company disclosed a net borrowings-to-equity ratio of 101% and total liabilities-to-equity ratio of 215%.
- Net cash used in investing activities was ₩6.700 trillion, principally reflecting capital investment. Net cash provided by financing activities was ₩1.946 trillion, including increased borrowing; cash and cash equivalents declined by ₩1.743 trillion before exchange-rate effects.
- Management stated it believed working-capital sources, including debt financing, would be sufficient for at least 12 months after the report date. It also reported compliance with debt covenants at December 31, 2022.
Material changes versus FY2021
- Revenue decreased 11.8% on the basis used in management’s comparison. Television revenue fell 26.3%, IT revenue fell 10.1%, and mobile and other applications revenue increased 3.1%.
- Panel shipments declined from 250.9 million to 219.8 million. The average selling price per panel was nearly flat overall, but television-panel ASP fell 24.0%; IT and mobile/other ASPs increased.
- Cost of sales rose 1.9% while revenue declined, lifting cost of sales to 94.9% of revenue from 82.2%. Gross margin consequently contracted by 13.5 percentage points.
- The company recognized ₩1.331 trillion of impairment losses associated principally with its large-sized OLED business following a separate CGU assessment and weaker demand and outlook. The impairment assessment was identified as a critical audit matter.
- Cash from operations declined by ₩2.742 trillion and capital expenditure increased by ₩1.938 trillion. Short-term borrowings rose to ₩2.579 trillion from ₩614 billion.
- LG Display closed its P5 facility in June 2022 and P7 in December 2022, reduced China TV TFT-LCD capacity, and temporarily reduced large-sized OLED production in November to manage inventory and respond to weaker demand.
Outlook, commentary and risks
- Management expected 2023 cash capital expenditures to be lower than in 2022, primarily funding previously announced OLED-facility investments. The ₩3.3 trillion small- to mid-sized OLED facility in Paju was under construction, with work expected to continue through Q1 2024; timing remains subject to market conditions.
- Management’s strategy is to increase differentiated, higher-margin OLED products and reduce exposure to TFT-LCD panels. It gave no specific revenue, earnings, margin or shipment guidance in the provided filing text.
- Key risks include panel-industry cyclicality and oversupply, falling selling prices, weaker consumer demand, intense competition, customer concentration, high fixed costs and capacity-utilization risk, capital and refinancing needs, foreign-exchange and interest-rate exposure, and dependence on timely product development and manufacturing yields.
- The top ten end-brand customers represented 86% of 2022 sales; LG Electronics accounted for approximately 18%. In March 2023, LG Electronics agreed to provide a ₩1 trillion, 6.06% long-term loan, with maturity in March 2026. This is a post-year-end financing event.
- Other notable exposures include ongoing UK follow-on antitrust litigation by Granville and an Israeli class action for which LG Display said it had not been served. The Puerto Rico antitrust case was dismissed without prejudice in October 2022. A 2021 chemical-leak incident led to a ₩20 million company fine paid in January 2023; an appeal involving certain employees remained pending.
- The company is transitioning certain U.S.-dollar instruments from LIBOR to SOFR by June 30, 2023. It reported ₩2.347 trillion of LIBOR-indexed borrowings and ₩169 billion of related swap obligations with maturities after that date.
Most important facts for investors to verify
- Reconcile the ₩26.152 trillion IFRS revenue figure with the ₩26.365 trillion management comparison figure and the ₩213 billion hedge-loss reclassification.
- Review the large-OLED impairment assumptions, especially forecast revenue and costs, discount rate, terminal growth, and the sensitivity of the valuation.
- Assess the working-capital deficit, restricted deposits, debt maturities and refinancing needs alongside the company’s 12-month liquidity assertion.
- Track whether OLED mix, yields and demand improve enough to offset panel-price pressure, lower utilization and continuing fixed costs.
- Monitor the LG Electronics loan, customer concentration, outstanding litigation and safety matters, and completion of the LIBOR-to-SOFR transition.
KPMG issued an unqualified opinion on the IFRS financial statements and concluded internal control over financial reporting was effective as of December 31, 2022.