LG Display's Management Discusses Q3 2012 Results - Earnings Call Transcript
October 26, 2012 11:44 AM ET
LG Display Co., Ltd. (LPL)
Q3 2012 Results Earnings Call
October 26, 2012 8:00 AM ET
Hee Yeon Kim - Head, IR Department
Sang Lee - Vice President, Market Intelligence
Kevin Choi - Vice President, IT Marketing Department
J.S. Park - TV Marketing Department
Brian White - Topeka Capital
Andrew Abrams - Avian Securities
Dan Malcolm - Viking Global
Ben Lu - Seligman Investment
DS Kim - UBS Securities
… the Fiscal Year 2012 Third Quarter Earnings Results by LG Display.
Hee Yeon Kim
Welcome to LG Display third quarter year 2012 conference call. My name is Hee Yeon Kim, Head of the IR Department. On behalf of LG Display I would like to welcome everyone to our global quarterly earnings conference call.
I’m joined by our IR staff, as well as representatives from TV marketing, IT marketing and Market Intelligence. Sang Lee, is Vice President of Market Intelligence; Kevin Choi is Vice President of IT Marketing -- IT Marketing Depatment; J.S. Park is heading up the TV Marketing Department.
Next slide please, before we move on to the earnings results. Please take a minute to read the disclaimer. I would like to remind everyone that results are based on consolidated K-IFRS accounting standards and are unaudited.
Next slide please. This conference call will take about an hour. Before we go into the Q&A session, please allow me to highlight our Q3 results, performance and outlook.
Moving on to revenue and profits on the next slide. EBITDA lifted from seasonal demand and launch of the new smart devices, the panel shipment rose by 7% in third quarter.
In particular, Chinese Golden [rift] demand was better than expected with type of government subsidy. As the high-end premium product proportion from FPR treaty to smart device continuously rose in third quarter. We recorded the highest quarterly revenue at KRW 7.6 trillion, up 10% quarter-on-quarter and achieved operating profit turnaround recording KRW 353 billion.
Overall panel price has showed this table front and our blended ASP rose as premium product proportion increase. Operating profit margin was 3%, while we recorded EBITDA margin of 19%. Income before tax was KRW 230 billion and net income was KRW 158 billion.
Moving on to slide four, looking at our financial positions and ratios. At the end of September, cash and cash equivalent recorded KRW 2.5 trillion, in preparation for the seasonal demand and the new product launch, the inventory amount rose to KRW 2.7 trillion, while recent inventory fell from last quarter.
The increase in the inventory amount is also due to increase in specialty product portion, as debt decline KRW 104 billion from last quarter, recording from KRW 4.7 trillion. Liability to equity ratio fell 4 percentage points to 154% and net debt to equity ratio remained stable at low 20%. The quarter ratio rose 5 percentage points to 86% improving the balance sheet.
Moving on to slide five, looking at our cash flow. Cash at the beginning of the quarter was KRW 2.7 trillion. Cash flow from operating activities resulted in cash inflow of KRW 1.2 trillion.
Cash flow from investing activities resulted in an outflow of KRW 1.3 trillion and cash flow from financing activities resulted in an outflow of KRW 69 million. As a result, the net change in cash was outflow of KRW 155 billion.
Moving on to slide six, I would like to go over our performance highlights. During third quarter, our shipment increased by 7% to 9.2 million square meters, while ASP per square meter increased by 5% to $733. The rise in price reflects the increase proportion of high-end specialty product itself.
Moving on to our product mix on slide seven. The TV segment represent 47% of our revenue, followed by monitors at 16%, notebook at 13%, tablet is at 15% and mobile applications at 9%. The tablet segment rose this year by 5 percentage points to 15%, due to new model launch by various customers combined with existing tablet product volume increase.
Moving on to slide eight and looking at our capacity. Our producible capacity increased by 8% to 12.1 million square meters in third quarter, due to P98 full impact.
Next we turn to our outlook section. The shipment demand and volume increased from new smart device are expected in Q4. Thus we expect a high single-digit percent rise in the shipment in Q4 and anticipate the overall panel price to show a stable trend.
Next I would like to touch upon our business strategy going forward. Next year the demand is unlikely to improve much further than this year, as microeconomy uncertainties persist. Smart devices are expected to grow by double-digit, but overall panel demand growth is down to be around low to mid single digits.
However, we anticipate supply situation to improve in year 2013 with capacity loss due to industry fab conversion trend and new technology adaptation. As I mentioned, the uncertainties within the micro situation is difficult to escape or scatter. However, we aim to overcome our predictable uncertainties such as the seasonality and supply within the industry.
In order to achieve stable profit going forward, we will continue with following actions. First, differentiated specialty product and technology such as IPS, FPR and White RGB OLED will be used to maintain a trends and relationship with our strategic partners.
Second, we will carry our prudent inventory control and CapEx discipline, contributing to improve industry supply situation. With this action, LG Display will continue efforts to become a structurally different company among our peers.
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