LG Display Co., Ltd. — FY2020 Form 20-F Summary
Filing and period: Annual report filed April 29, 2021, covering the year ended December 31, 2020. The filing reports annual results, not standalone 2020 Q4 figures; quarterly values are not provided clearly in the supplied text. Financial statements are consolidated and prepared under IFRS as issued by the IASB, and were audited.
Business context and financial highlights
LG Display manufactures TFT-LCD and OLED panels for televisions, IT products and mobile and other applications. Its strategy is to shift toward higher-value OLED and differentiated panels while reducing exposure to less profitable TFT-LCD products.
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | W24.230 trillion | W23.476 trillion |
| Gross profit / gross margin | W2.643 trillion / 10.9% | W1.868 trillion / 8.0% |
| Net loss | W70.6 billion | W2.872 trillion |
| EBITDA (company-defined, non-IFRS) | W3.840 trillion | W471 billion |
| Operating cash flow | W2.287 trillion | W2.707 trillion |
| Cash capital expenditures | W2.604 trillion | W6.927 trillion |
| Cash and cash equivalents | W4.218 trillion | W3.336 trillion |
| Total liabilities | W22.335 trillion | W23.086 trillion |
IFRS statements do not show operating profit as a separate line. The filing cites K-IFRS operating losses of W29 billion in 2020 and W1.359 trillion in 2019 in a separate Form 6-K.
Changes versus the prior year
- Revenue rose 3.2%; growth in IT panels and mobile and other applications more than offset lower television-panel revenue.
- IT revenue increased 11.7%, supported by remote work and online schooling; mobile and other applications revenue increased 15.5%. Television revenue fell 16.2%, as television-panel unit sales dropped 38.2% amid the shift away from TFT-LCD production. Higher OLED mix lifted the average television-panel selling price.
- Gross margin improved from 8.0% to 10.9%, reflecting product mix, stronger demand and higher average selling prices. Selling and administrative expenses fell 21.6%, and R&D expenses fell 10.1%.
- Net loss narrowed substantially. The prior-year comparison included W1.550 trillion of property, plant and equipment impairment and W249 billion of intangible-asset impairment; 2020 charges were W38 billion and W80 billion, respectively.
- Operating cash flow declined about 15%, while cash capex fell sharply. Cash flow from operations less cash capex was approximately negative W317 billion, calculated from the reported amounts.
Liquidity, debt and capital allocation
At year-end, current assets of W11.099 trillion slightly exceeded current liabilities of W11.007 trillion, producing a W92 billion working-capital surplus after deficits in 2019 and 2018. Gross borrowings and bonds were approximately W14.07 trillion; cash and current bank deposits totaled W4.30 trillion. The company reported a 175% liabilities-to-equity ratio and a 77% net-borrowings-to-equity ratio, both lower than in 2019. It reported compliance with debt covenants at December 31, 2020. No shareholder cash dividend was declared for 2020; none had been declared for 2019 either.
Outlook, commentary and risks
- Management expected 2021 cash capital expenditures to exceed 2020, primarily to fund previously announced OLED facility investments. The filing gives no specific revenue or earnings guidance and says spending plans remain subject to reassessment.
- COVID-19 had a mixed effect: demand for IT products increased, but the pandemic also caused temporary production suspensions and supply-chain and customer-disruption risks. Future demand and the pandemic’s duration remained uncertain.
- Key risks include display-industry cyclicality and price erosion, capacity additions and competition—particularly from China—customer concentration, product-quality and technology execution, and the high fixed costs of manufacturing and OLED investment.
- China accounted for 68.8% of sales by customer location; the top ten end-brand customers accounted for 85% of sales. LG Electronics represented approximately 17.5% of 2020 sales.
- The company recognized a W524 billion income-tax benefit despite a pretax loss, including recognition of previously unrecognized tax-credit carryforwards following an extension of their carryforward period. Deferred-tax-asset realization depends on future taxable income.
- Ongoing antitrust and other legal proceedings could result in costs or cash outflows; no provision for legal claims was recorded at year-end based on management’s assessment. A January 2021 chemical-leak incident at a Paju facility caused worker casualties and was under government investigation after the reporting period.
Important facts for investors to verify
- Review subsequent quarterly results to assess whether demand, panel prices and improved margins persisted beyond FY2020.
- Track OLED facility utilization, yields, customer demand and the returns expected from higher 2021 capital spending.
- Reconcile debt maturities, refinancing needs, variable-rate exposure and foreign-exchange sensitivity; the company disclosed material USD and LIBOR-linked exposure.
- Assess the assumptions supporting deferred tax assets and the Display cash-generating unit impairment test, both identified as significant estimation areas.
- Monitor customer concentration, unresolved legal matters and the outcome of the Paju safety investigation.