Q2 2023 LG Display Co Ltd Earnings Call
Turnaround to profit as expected in Q4, an anticipation of high panel demand by set makers. Following the returned to healthy inventory levels and growth in contract based business, but.
But as explained earlier the market is yet to start to full recovery driven by real demand. The company will keep a close eye on the external environment as we strive toward more meaningful performance by focusing on recovering financial soundness and upgrading the business structure. Thank you very much for attention.
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And the product perimeter that brings us to the end of earnings presentation for Q2 2023, we will now take your questions. Operator, please commence with the Q&A session.
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Now <unk> session will begin please press star one that is star and one if you have any questions questions will be taken according to the order you press the number starwood for cancellation. Please press star two that is star and two on your phone.
In order to allow as many training chances as possible within the restricted time, we would appreciate only two questions per each participant.
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Our first question will be provided by Don Kim from Kb Securities. Please go ahead with your question.
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I'd also tell him I was talking before taking your questions. Now my questions are with regards to OLED as well as the consolidated performance now I'll first of all for the small and mid size OLED lost last year due to technological technical issues. The shipment of panels was reduced so it does.
The company expect a similar technical issues this year for small and mid sized OLED panels and does the company believe that there would be similar issues that would also reduce the shipman than the initial plan and my second question is now the company has now been seeing losses for the past five quarters.
But then in the presentation. It was mentioned that the company is now expecting a turnaround in the fourth quarter of this year.
Then from which business.
The biggest contribution will come so will it be the large OLED or the small to mid size OLED or any other businesses and and what are the reasons or the drivers are for such a contribution from that particular business.
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Thank you very much for your questions are this is oh sock, Brian her in charge of LG display IR now first of all let me.
Clarify that a we are not able to comment on any situation involving the customer, but then now for the second half of the ear are based on our expanded mass production capability. The company intend to increase shipment and by doing so we also.
Plan to improve our consolidated earnings.
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This is easier so responding to your second part of the question and as D. C. F. O has already explained in his.
Presentation of the highlights are we see that the inventory level is going down across the market and as a result, we see that the profitability is going to improve on both the large as well as the medium sized OLED.
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Where are we are expecting the biggest momentum to come in the second half is as Mr. Brian . How has just explained is from the capacity increase as well as the increase in the volume of the small size panels.
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Adam Waldo team and educate put enhancing Gordon aching Hudson and into the following question will be presented by hands, who came from <unk> Securities. Please go ahead with your question.
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Thank you very much I also have two questions.
They are pertaining to investment and EBITDA now first about the annual investment the Companys guidance was somewhere.
In mid to high three trillion one level for the ear now having gone through quite a lot of the changes in the circumstances I wonder whether the numbers remains unchanged or is there any are there any changes to the number for the annual investment.
And then.
Also.
What would be the expected investment for the ears, 2023 as well as 'twenty 'twenty four and also what would be the company's guidance for EBITDA.
And then the second part of the question is also about investment, particularly in the OLED, our I T. So I understand that the company is now investing in the OLED a T. A gen. Six so if the company can provide us an update regarding that investment and then now are with the company's a client in North America.
What would be the plan for the I T investment for Gen eight.
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Thank you. This is the CFO responding to your question no. Yes. The company has given the guidance of a mid to high three Chilean level for the annual investment.
And currently investment is underway, where the investment is necessary within the guidance range, but of course at the same time, we are conducting efforts in parallel to improve the efficiency of the investment as well as spending.
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And as the investors would be aware in this industry investment is conduct investment is implemented over a long period after our preorders and that means that the it is not easy to flexibly adjust the investment amount.
Given the circumstances.
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Yeah.
And of course, there was also a question about our expected investment for next year.
Now of course, the business plan for next year is yet to be finalized, but then maybe perhaps I can share with you some of the let's say some of the findings of the review that we have had so far regarding our investment plan.
So foreign next year, perhaps and so our thinking now is that there can be some a meaningful reduction from the mid to high level three trillion one level of investment of this year.
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And also as the company has already disclosed D investment into I T or lead Gen. Six is currently underway.
And this will continue into the first half of next year.
And there was also another question about investment potential investment in Gen. Eight and of course. This is a related to a customer and also for ourselves what we look into so what are some of the factors that we consider are the technological development and so long as the progress being made.
And also whether there is development in the demand from the market that is sufficient to contribute to the company's profitability. So there are a host of factors that we consider before we make the decision about investment. So we will do so again this time in due time after considering all the different factors.
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The following question will be presented by Shimon <unk> from Bank of America. Please go ahead with your question.
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Oh. Thank you very much snow are there was a mention about turnaround to profit in the fourth quarter.
And I'm just thinking about the simply then we see panel price rising I believe only in LCD TV and not in others, then I am trying to better understand the rationale behind the expectation of turnaround in Q4.
And especially because the company appears to have done done most of the cost reductions that it can and of course that there is going to be some volume increase in the second half compared to the first half, but still I'm not sure whether that would be sufficient to moved the company from almost day, one children, one loss in one quarter or two.
The two almost zero next so again I'm trying to better understand the rationale so I would like to ask for further elaboration and then the second question is no I see that there has been steady increase in borrowing so what would be the company's interest expense in the second quarter that would.
Be helpful for us to calculate D.
Financial costs over the ear.
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This is the CFO speaking and the question was about the interest expense or the finance expense for the second quarter.
But I know that you are simply going to multiply that number by four so I would just like to go right ahead and give you the annual number which is expected to be at low to mid 600 billion won.
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And this is the CSO and now I would like to comment about the turnaround expected turnaround in Q4 and as explained earlier, our a small panels. They account for about 20% and over the next two quarters are there is unexpected increased by 10 percentage points each quarter.
And because of the small panel as you would know it has very high seasonality and Theres also the new fab that we are operating.
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And another factor is the mid sized a tea, which has taken up the biggest share out of our revenue in Q2 now of course the price for T. V is moving up but then compared to that it is true that for the mid size I T. There is.
Not such a big movement, but it appears as if the price for midsize I T is also bottoming out and we have been seeing slight increase and we believe that that is also going to contribute to profitability.
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The following question will be presented by Thomas Zhang from Samsung Securities. Please go ahead with your question.
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Yes.
Now the first question yesterday CFO commented on a possible turnaround in Q4 and I. Thank God for Q3. It was just about improvement so no specific guidance as far as I understood then I wonder whether this is.
Incorporating the possibility of a delay in mobile shipments in the second half or is it regardless of that meaning that it is just a in consideration of the overall market circumstances and that the company believes that it will be difficult to go over a D. B P in the third quarter.
And the second question is now yes that there have been press reports about a new customer in the large I T OLED and but then that the company's guidance was simply about the possibility of starting a new partnership. So if there could be some further highlights regarding this then there would be appreciated and.
Now based on this then of course or the business plan I'm sure. It has not been finalized, but then now what would be the company's expectation of our the volume for next year.
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This is the CFO speaking and the question was about the potential turn around in Q4, an improvement in Q3 now overall it is clear that there is improvement in Q3 and then the question. You also asked about a whether T mobile shipment delay is.
Reflected in this projection or whether it is simply based on D rising LCD prices in the market.
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Now for mobile shipment delay I must clarify that the company has never commented on it but in principle are regarding the market volatility or the companies inside operations and principal rehab, we always remain conservative.
So for the Q3, what we are expecting is that there is going to be a faster improvement in Q3 than what we have seen between Q1 and Q2.
And then and that improvement is going to accelerate in Q4, two achieve a turnaround.
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And also you asked about a new customer in large size.
But please understand that the given the nature of our business. Our industry are we are not in the position to comment on anything related to the customer.
And that is.
You know the set makers position. So please understand and that also means that there are no highlights for me to present to you at this time.
And there was another question about the potential volume next year and again there is nothing for me to comment on at this time.
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The final question will be presented by <unk> Kim from Merit Securities. Please go ahead your question.
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Now of course, the demand demand remains uncertain in many categories, but then now in T. V. S. L. I mean, the demand is uncertain, but they know things to some correction in supply the pricing for television continues to rise.
But then we do not see.
Such conviction in a T. So for the mid to long term, what we believe.
To have a almost a certain growth in demand is the auto display category.
And so that is what are the market tends to believe and I believe that that the company also has a similar expectation then for the medium term what would be the potential orders received for auto business and also what is the company's plan for the auto.
Orders to be received for this year and next year.
So and also what would be the revenue to be recognized in this business again for this year and next so if such information can be shared with us and that would be much helpful.
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This is Q Hansen, Vice President of auto market in responding to your question now are up to the second quarter for the OLED orders received for.
It has been a four trillion won and we believe that the orders will so the orders are continued to grow. So we are we are currently continuing to upwardly adjust do you expect the orders for next year and year after that.
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And as for the order backlog. It is currently 20 trillion won and it is going to be helpful. In achieving a consistent growth in revenue and we believe that there is going to be on annual growth by mid 10% until 2027.
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I have one question and that is about the Chinese are about the company's LCD fab business in Guangzhou China.
So what would be the timing of the sell off and also about the tangible asset disposal. So regarding the LCD fab in Guangzhou, China is there any update that can be shared with us and.
In relation to that when does the company believes that such update can be provided officially in the market.
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And I do realize that there are a lot of speculations in the market regarding the LCD fab in Guangzhou, but.
What is for certain now is that about half of it is still running and in terms of the asset rationalization or so we are trying to rationalize the use of the assets. But then nothing is determined yet. So regarding this there is really no progress for me to share with the market.
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Thank you very much that concludes the LG display 2023 second quarter earnings results Conference call. Thank you and if there are any additional comments or questions. Then please contact the IR team.
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