Q2 2020 LG Display Co Ltd Earnings Call
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The company's production capacity was reduced by 4% qoq as downsizing of low-margin TV Fab continues. It is a decrease by 29% Yoy.
Next is revenue breakdown by product segment.
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What is noteworthy in Q2 revenue is that share of 80 was 52% going over the 50% mark? This is largely attributable to The Cove it triggered increase in work from home and online education TVs revenue-sharing was 23% down eight percentage points qoq do to decrease in TV panel and LCD panel price Mobile and other products share was 25% down on seven percentage points due to demand slowdown in Upstream industry just like smartphone and Auto
Tom and give me hold on me to bring it up. Next is the company's financial position and ratios.
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The company's inventory at the end of Q2 was 2.039 trillion one down 12% qoq there was production adjustment in response to depend on it related demand slowdown and uncertainties can move you too young.
Ask for financial ratios liabilities to equity ratio and net debt-to-equity ratio Rose slightly QQ.
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Cash flow at the end of the quarter was 3.591 trillion one staying flat from the previous quarter despite the increase in net loss. Thanks to strong financial management such as more efficiency in the working Capital Management. I don't see me that
Next is the company's guidance for Q3 2020.
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in Q3, although the risks from covid-19 continue as dependent lingers on Revenue growth and profitability improvements are expected for the company mass production will begin at Chinese older tab shipment of Piola for smartphones is likely to grow and differentiated products will increase
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Area shipment is expected to grow at 20% level and blend it as is to grow additionally at a mid-single-digit as a result. It is expected that off and recover the revenue before the LCD structure Innovation. Thanks to realignment around high-value and businesses around High value-add businesses off despite the capacity decrease following Fab downsizing.
Taman songs our next presentation by the Company CFO DH song
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Good morning to our shareholders investors and analysts IMG H saw CFO of LG display.
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Covid-19 and its repercussions are lasting longer than expected heightening uncertainties in the market and business environment first and foremost. I wish everyone in your family health safety.
from Monday
allow me to add some more details and the company's Q2 performance. They were both positive and negative impact from covid-19.
Global Summit.
Area shipments fell 4% qoq shipment of TV panels for shortly following the global spread of covid-19 and subsequent offline retail shoves market demand for mobile products also shrink.
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On the other hand work from home and online schooling have emerged as new opportunities as part of our new lifestyle. This has led to increase in sales of IT projects or the company has unique strengths ASP Rose 15% qoq and 44% Yoy while total revenue was up 12% off.
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ASP recover to the $650 level the highest in 22 quarters since Q4 2014 as the company's business realignment walk-around OLED steadily progressed.
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Despite the growth in Revenue operating loss increased CO2. There was production adjustment of TV and mobile products in response to demand uncertainty in a slow down in Upstream industry, which increased the fixed cost burden and there was also a decline in a mostly coming from LCD, which put a further drag on profitability off.
You know someone get among next is Q3 2020 Outlook and the company's Direction.
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Although the macro-environment in Q3 will not be favorable due to the lingering covet impact the company will be able to show part of the outcome of its business realignment efforts wage such as mainstreaming large OLED Piola business turn around and LCD structural innovation.
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Or OLED TV. There were some challenges due to covid-19 such as difficulty sending our Engineers, but we are able to establish the optimum conditions for mass production month and enables much production to begin in July as the Fab has newer equipment compared to domestic jobs, which can support high efficiency and productivity. We will start seeing valuable impact soon.
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Improve domestic production yield 477 in 48 inch and 65 inch 55 inch MMG line to the existing Fab level short period of time and ensure that we can respond to the market demand in the second half the annual sales Target is planned at high four million to five million wage given the persistent Coventry risks. We will remain flexible to the market environment as we try to maximize sales opportunities.
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Ask for a PO led the favorable seasonality is expected to pull up the shipment of new products for the Strategic client. There have been many challenges. We were able to stabilize your product quality and yield and will now focus on ensuring reliable Supply.
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480 the new trends of working from home and online education are expected to remain opportunities. The company will keep capturing such opportunities by responding without the way to clients needs with it products or the company has unique strengths.
CD-ROM I keep knockout key off a few words about the path of our LCD structural Innovation. The purpose of this is to further strengthen the company's already competitive and products. This is especially so for eighteen and forty. We will also keep strengthening our competitiveness based on the Guangzhou Fab or the company has Market competitiveness off.
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Based on the performance.
To be achieved in our major business areas significant Improvement in profitability is also expected in Q3 from the previous quarter. But to make sure we have a fundamental Sound business structure. We need to see results from the Three core projects at the same time. The company's performance will be on an upward Trend but there will be some thousand downs from quarter-to-quarter depending on factors like covid-19 or demand for individual products like the smartphone.
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next is management Direction and financial management.
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The ongoing pandemic defies easy prediction to respond to an environment with growing volatility. The company will undertake early financing and stronger capex and working Capital Management under the worst case scenario.
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That concludes the company's presentation on cue to Performance and choose three Outlook. I hope to come back to you at the next earnings release in October with more improved performance and Outlook. Thank you very much for your attention.
He's dead that brings us to the end of earnings presentation for 20. We will now take questions operator. Please commence with the Q&A session.
Okay. Well, I don't know each name of similar number. If you have any questions, according to the author you press the numbers. One for cancellation, please press star to that you start and two on your phone in order to allow as many connections as possible within the restricted time. We do appreciate only two questions per participant.
The first question will be presented by Securities, please go ahead with your question.
ma'am
Yep. Yep. I'm sorry. I have two questions about OLED first is about the ramp-up plan at the control line in the second half of this year and along with that. What is the company's plan for the production of large outlet? And the second question is about. So, what is your outlook for the people that utilization as well as our plans for improving profitability?
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No decision response to your first question as was reported earlier. There have been many challenges in the early part of this year. But in the end we were able to start mass-production in July this year and also based on this the ramp-up we'll move on as scheduled. In other words. We will try to have the to enable load of the full capacity 60,000 as soon as possible. And for the year now, of course in the second quarter, there was a sales slowdown because of the covid-19 impact but them for the year. The target is to have the high four million to five million units according to our sales plan. Of course this also depends upon the situation with covid-19. For example, the lockdowns in many economies or the reopening of the economy's and also the retail shut down or reopening of the shutdown. So of course there would be still. Yep.
from covid-19
But then since we have already gone through the difficulties and challenges in the second quarter. We now have the experience to deal with these challenges. So now if there are continuing difficulties, let's say if there are continued shut down in the retail side, then we could do some expansion of sales on the online channels were also work with the customers to have promotions or other events in order to drive sales. So we believe that that's research efforts. We will be able to meet the sales plan of high four million to five million units.
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And regarding your second question about the utilization of the small-to-medium in the second half of this year. Of course, we have the Fab and creamy a known issue. But especially for the patio Fab the plan is to have full utilization. So assuming full utilization then we believe that this is also going to have a dog have a meaningful impact on improving profitability.
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I also have two questions. First is about the panel for the products. Now. I keep em off so you can have my you have stable operation of the lines for the year. And this means that you also have to wisely overcome the nun High season the slow season. So I that means.
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Panel, we are we have one hundred percent. So it is 100% based on IPS. And on top of that. There is the oxide technology that we utilize. I believe that this is the combination of this and oxide technology that give us the differentiating factor compared to other peers and thus the competitiveness and also in the course of that wage. We have also restructured the low value-added businesses or the products like the T and type for example for notebooks. So the fact that we have focused on the higher value-added products, I believe is the success factor in the it products today.
What's coming back on Calhoun on or off off off your marketing. And also regarding your question on concerns over the perhaps the possible repeat of the month?
In the plastic as well in the it products as well now. Yes, I think in this case, all we can do is make sure that we look ahead 1 to 2 years or even three years in terms of our technology, especially for outside and in the outside based technology, we already have our strengths and competitiveness. I believe that we need to continue to differentiate though that even as the appears try to catch up with us, we would be able to keep the distance between ourselves and the rest of Life guarding this point the representative from marketing site will deliver further details.
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Getting know when we look at the trends in the it products. Then we see that there is still much room for further differentiation, for example high resolution or high pixels and low power design. So these are the areas where we can continue to differentiate and also as the CFO has explained now the company already has wage competitiveness in IPS technology as well as oxide and it is based on such technological competitiveness that we will continue to keep up with the trends and continue to lead so that way we will be able to maintain our competitive advantage and continued to lead the it Market.
You want them to come home? Where did he go out in the dark? And before I move on to the second question, I would like to respond back. I would like to say a few words about the LCD business. Now after the one of our peers announced that they would be withdrawing from the LCD business there appears to be some misunderstanding in the market and Industry that the company might also withdraw from the business entirely.
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But as I have explained already as I was explaining about the direction of the companies LCD structural Innovation, what we intend to do with the LCD business Innovation is home to strengthen the competitiveness of the already competitive and products. And so we already have the strong Fabs and Catholics and what we are trying to do is make sure that they will become even more competitive. So in such a case, I would say that the our portfolio of it products are very much different from the competitor and so in terms of the product volume or the customer base or the product profile a product portfolio, we are quite did you do from the pier and from the other players? So what we are planning to do is to innovate the LCD business structure so that the it products will remain a key.
Of revenue for the company.
And we will continue to promote this business sector. So I do hope that there would be no misunderstanding about the companies of the business.
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No moving on to your question about the utilization of plastic OLED Fab now, of course, it is true that there is seasonality in the smartphone. So there is probably no avoiding the trend of low demand in the first half and high demand in the second half. So but then when we look at our capacity and also the market trends and combining that with our capacity balance, so if you can so on top of this if it can continue to have trust from the customers and have a stable Supply off and I believe it will be able to overcome. This is Nala team.
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And specifically about the operation plan for a party and creamy crab now for Patrick table as you would know. It is specialized for smartphones or is it produces a diversity of products? So we are already producing A diversity of products. And also we are making preparations for further diversity. So I am currently making preparation for small volume production of a variety of products in the, Fab. So for example Auto products are already being produced at the table and also the variable products will be produced in the, that soon and also for the future products that we are preparing for example foldable. They will also be producing a lot of creamy and aside from that there can be many other attempts that can be made based on plastic OLED and they and they would be mostly be produced out of Chrome.
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Please go ahead with your question.
Hi, good afternoon. Thanks for taking my question. If you could first of all comment a little bit about authors and all that you just mentioned you announced a couple of weeks ago design when we've messed this and that comes after another one from from Kelly. Yeah, so if you think of five you how much you think Automotive could become of total RGB Orlando revenues for LG display and hospitable levels Automotive contracts compared to to mobile and then secondly if I make a clarification on what you said earlier about profitability for specifically plastic for Patrick, did you actually say but even at full rates you may actually no
Profitability later. Thank you.
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No, then let me clarify first. So that is to your second question. What I mentioned earlier was that assuming full utilization there is going to be meaningful or a significant improvement in our profitability.
Plastic boot. Oh, so you've consumed back to me as well. You presented on Google Plus with me.
And coming back to your first question about the plastic OLED auto business and the question I take it was that for the next five years. How much growth do we offer see from the RGB OLED auto business now, if I may explain first about the status quo out of all the orders that we receive for auto theft auto about 20% is for a plastic OLED.
How long would the money so that is a global market place or not, You're probably going to tell you canceling it is cancel controller off.
And S for the next five year projection now, we are looking at the market from various angles. And as far as I understand we have about 25 plus global market share in the auto display market. And so then the question is out of the auto display how fast and how wide can we penetrate with the plastic OLED largely determine the numbers for the next five years, but then this beings so early in the current Trend. We are still having a lot of discussions about various possibilities with the different customers and because of this it is the situation is quite fluid and because of the it is very difficult to give you any numbers at this point.
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And about the profitability of the auto plastic OLED. Now the very nature of the auto business demands that the supply continues for a long period of time like five years and this also is a small volume multiple variety product. So in this case, what is important for us is not just the absolute the profit off the question is whether we would have profitability that is enough to cover the risks that would come from such long-term Supply. So it's not about the auto plastic profitability being higher or lower than four than compared to other plastic molded products, but then it's about whether it is enough to overcome or enough to manage the money involved with such long-term Supply. So that is our Target that kind of profitability.
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Tom Wood Honda Financial investment, please. Go ahead with your question.
There's just a whole time talking about so then you see the TV show come back on Monday, Tuesday, Wednesday Thursday. We don't go back home.
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I have two questions 1 LCD TV the other about plastic OLED now for the LCD TV. This is this question is specifically about this crap schedule. Now, I'm sure you have the schedule for sequential scrap in the LCD TV. But then recently we see that there is a very fast recovery in demand for TV. And also the panel price is on the phone. So I wonder whether you plan to adjust the schedule for the and also looking at the panel price and the current Rising Trend how how far do you believe that this will continue to what level and the second question is about the plastic over it and about the E6 line because there have been media reports recently that the company has plans to make an investment to the third line of the E6 line. So I wonder whether this is true and also for the E6 line now the domestic customers or you're domestic customer.
Also be utilizing integrated touch panel in their next product. So what is the company's progress on the Keowee technology?
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regarding your first question about
E LCD now regarding the it products for the LCD. I believe that I have fully explained earlier. So then more specifically about the TV in terms of the month. We were thinking about the structure Innovation. We were thinking about what would be the most competitive for us and the answer is probably the Guangzhou LCD fob. Also, we believe they even globally among the 8th fastest. This stuff is probably one of the most competitive and because of this the Guangzhou LCD Fab is going to remain the main software LCD TV for the company.
Yep. Yep. Yep.
So given that then as for the production in Korea of the LCD TV for consumers now as I have mentioned earlier in the month earlier I are the plan now is to stop the domestic production of the consumer LCD TVs. So that principle remains unchanged now having said that month because of the situation and because of the situation with some customers we intend to be flexible for the shorter-term. So if I may summarize in the overall direction remains unchanged, but then for the shorter-term we are thinking about how to be more flexible.
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And your question about some media reports on the company's plan to invest in a third line in the East six lines. So by third line, I take it that you mean Thursday or 15 K. So is there a plan for the company to invest in an additional 15 K. So defining the question that way then let me say that there is no such decision to invest in an additional 15K capacity and no such investment is currently being made either not having said that now there is a deposition line so that we may have some deposition equipment. And what we are planning to do is to make improvements on the deposition line so that we will be able to prevent the capacity laws that can occur in the course of development.
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And then pertaining to your question about the competitor of the of the company's Readiness for the technology. Now as for the technological prep and the equipment for the t o e we have already completed the preparation and I will not be naming the customers, but we are already supplying Theory life to some customers.
Me by Ninja dead and look at you said that we will now closed. Earnings conference call. Thank you. Once again for joining us today. Please do contact us at our team for any additional questions. Thank you.
and then regard
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