LG Display Co., Ltd. (LPL)

Q4 2010 Earnings Call

January 21, 2011 8:00 AM ET


Anthony Moon – Vice President, Investor Relations

J.S. Park – Head, TV Marketing Department

Seong Lee – Vice President, IT Marketing


Brian White – Ticonderoga Securities

Andrew Abrams – Avian Securities

Richard Klotz – Moore Capital

Olga Levinzon – Barclays Capital

Jeffrey Toder – RBS

WonJae Lee – Credit Suisse

Ben Lu – Seligman Investments Securities


Anthony Moon

Good evening, good afternoon and good morning from wherever you’re calling, wherever that applies. My name is Anthony Moon. Again, I’d like to welcome you to LG Display’s Fourth Quarter Results Conference Call for 2010.

Now, with me here is our IR staff as well as the new representatives from the TV Marketing and IT Marketing. With us is J.S. Park, who heads up the TV Marketing Department; and Seong Lee, who is now the Vice President of IT Marketing.

As the operator just mentioned, before we go into the Q&A session, allow me to highlight some of the key points from our fourth quarter results and touch upon our outlook for the first quarter of 2011.

If you move to the next page and look to disclaimer, I encourage you to take a few seconds to look over that page. I would like to remind everyone that the results are based on (inaudible) and the results placed in this presentation are still unaudited.

Moving right along to slide number three, fourth quarter sales grew 10% year-on-year but fell 3% Q-on-Q as ASPs continued to decline in the fourth quarter. Looking at the two -- our two main products in the fourth quarter TV prices fell a bit more than IT.

We -- in the fourth quarter, we registered an operating loss of 387 billion won as we recognized 238 billion in expenses from the EU fine in the fourth quarter. Without recognizing the fine our operating losses would have been a much lower 150 billion won.

Now despite the losses recorded in the fourth quarter for the full year sales grew 20%, excuse me, 27% year-on-year to 25.5 trillion won and operating profit reached 1.3 trillion won up 30% year-on-year.

For the full year this is achievable as we increased the proportion of our higher value add products such as AH-IPS panels and LED TVs throughout the year, plus the introduction of the super high resolution display for smartphones.

Moving on to slide four, as of much, excuse me, as of the industry in 2010, we had 3.1 trillion won in cash and cash equivalents. Inventory declined to 2.2 trillion won, which is 11% fall from the previous quarter.

Our current inventory situation I would describe as being very normal, somewhere between two to three weeks. While our debt levels have increased a bit, our net debt to equity is still a very manageable 14%.

Moving onto slide five our cash flow. Cash flow from operating activities resulted in cash inflow of 1.7 trillion won. Cash flow from investing activities resulted in outflow of 2.1 trillion won, resulting in net cash outflow of 416 billion won. Now, note that our CapEx for the full year of 2010 amounted to 4.9 trillion won.

Moving onto slide number six. Our panel shipments increased 10% while our overall ASP fell 10.7%. As I had mentioned a bit earlier, prices did fall slightly more than what we had expected with TV price – with TV panel prices falling a bit more than IT panels.

Moving onto slide seven. If you look at our mix, you’ll see that the TV represented 56% of our total revenues followed by monitors at 19%, notebook PCs at 17%, and applications at 8%. So fall in TV portion is more due to the ASP decline than actual decline in upward products. The larger portion of notebook PC is the reflection of the rise in tablet PC panels for us.

Applications, which is mostly mobile displays or handphone displays remained relatively high at 8%, as demand for the super high resolution panels from smartphone remained strong.

Moving on to slide eight and looking at our capacity. Our input capacity remained relatively unchanged in the fourth quarter as we had very little – no new capacity coming on in the fourth quarter. Though a small incremental increase is from our P82 which as you know began to ramp earlier last year.

Now, looking into this quarter, 2011 first quarter, we are expecting our shipment to decline in the high single-digit range sequentially, due mostly to the seasonality of our industry. We expect TV panel prices to decline a bit more but at a much decelerated space compared to fourth quarter. On the IT panel side, we actually believe panel prices will remain very, very stable in the first quarter.

In the – within the whole full chain in the panels we see very little excess inventory throughout the full chain. Our set manufacturers continue to reduce their inventory of last year’s models and start to introduce new models later this quarter. We do expect demand to improve in the later parts of this quarter.

We expect our CapEx in 2011 to have around 5 trillion won on a cash out basis that includes our investment in our third, excuse me, our fourth Gen 8 in our new P9 facility and there is some amount of AMOLED CapEx included as well.

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