LG
Display books four-year-high profit, downplays supply
glut fear
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[April 22, 2015] By
Se Young Lee
SEOUL (Reuters) - South Korea's LG Display
Co Ltd downplayed risks of a supply glut in the global panel market
after reporting its best quarterly profit in more than four years,
seeking to assuage fear about a sharp profit decline later this year.
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Deteriorating economic conditions in Western Europe and weaker
currencies of key emerging markets like Brazil and Russia are
hurting television makers. Investors and analysts worry that TV
makers will cut orders and hurt panel sales, while factories of
Chinese panel manufacturers scheduled to begin production later this
year could weigh on prices.
Data from researcher DisplaySearch showed that prices of panels for
devices such as TVs, laptops and monitors as of April 20 were
broadly weaker than April 7. This pushed LG Display stock to a near
two-week low on Tuesday, and the shares ended unchanged on Wednesday
before the firm reported healthy profit.
Chief Financial Officer Don Kim said during a post-earnings
conference with analysts that the weak share performance reflected
market worries about the firm's earnings outlook. He said business
conditions would be challenging in the second quarter, but ruled out
the odds of a major oversupply problem.
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"It's unlikely for an oversupply problem to upset the current
supply-demand balance," Kim said.
Q1 PROFIT BEATS ESTIMATES
LG Display reported 744 billion won ($689.73 million) in operating
profit for the first quarter, the strongest since the at least the
first quarter of 2011, from when its current accounting standards
apply. That compared with a 490 billion won mean estimate by 32
analysts in a Thomson Reuters I/B/E/S poll.
The company attributed the rise to stable demand for TV panels as
well as belt-tightening: the firm cut production costs by around 150
billion won from the previous quarter.
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Analysts say LG Display also benefited from sales of screens for
Apple Inc's <AAPL.O> new iPhones and the Apple Watch, which goes on
sale from this week.
Yet Apple-related sales are unlikely to reassure those worried about
the outlook for LG Display, which in general earns more from larger
panels.
"Though panel prices are kept to a certain level, (TV) brand vendors
have revised their shipments downwards and may later face inventory
pressure," said researcher TrendForce.
LG Display said shipments would likely grow at a low to mid
single-digit percentage rate in the second quarter in sequential
terms, and that the average selling price in the broader market is
not likely to change significantly during the period.
(This version of the story recasts, adds the context and comments
from LG Display)
(Editing by Christopher Cushing)
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