LG Display Co., Ltd.

Hello, I'm Heo Deok, CEO of LG Display IRC. I would like to thank everyone who attended the 1st Anniversary Performance Announcement Conference Call in 2024. Today's conference call was attended by Vice President Kim Sung-hyun of CFO, Im Seung-min of Management Management, Lee Ki-young of Business Intelligence, Lee Tae-jong of Large Marketing, Lee Won-jae of Middle Marketing, and Kim Young-won of Small Marketing.

Good morning. This is Brian Ha in charge of LG Displays IR. On behalf of the company, let me thank all the participants at this conference call. Today, I'm joined by DCFO Sung Hyun Kim, Seung Min Im, Senior Vice President of Corporate Planning, Ki Young Lee in charge of Business Intelligence, Tae Jong Lee in charge of Large Display Marketing, Won Jae Lee in charge of Medium Display Marketing, and Yong Won Kim in charge of Small Display Marketing.

The conference call will be conducted in both Korean and English. Please refer to the provisional earnings release today or the IR event section in the company's website for more details on the financial results. Before we begin the presentation, please take a moment to read the disclaimer.

Please note that today's results are based on consolidated IFRS standards prepared for your benefit and have not yet been audited by an outside auditor.

1분기 매출은 계절적 비수기 영향으로 전풍기 대비 29% 감소하였으나 OLED와 LCD TV 패널 출하 증가, 모니터 패널 출하 확대, I will start with 2024 Q1 business results. Revenue was 5.253 trillion won. It was down 29% quarter on quarter due to seasonality, but up 19% year on year, driven by shipment growth of OLED and LCD TV panels,

and monitor panels, and the start of mass production of IT OLED panels. In terms of profitability, operating loss was narrowed YOY to $469 billion won. Although there was impact of seasonality, the company continued with work on upgrading to OLED-centered business structure and improving the cost structure. Production increased for medium and large products like OLED panels for TV, and mass production began for IT OLED.

Next, we will look at the output area and the number of pankas per area. The output area in the first quarter had a seasonal decline, but the output of product units such as TVs and monitors was expanded according to the plan, and it recorded 5.3 million square meters, which decreased by 5% compared to the previous quarter due to the small increase in existing guidance. Despite the relative impact due to the reduction in the volume of the mobile panel per area and the expansion of the medium-sized product unit, Next is area shipment and ASP per square meter. Area shipment in Q1 was 5.3 million square meters down 5% QOQ.

There was impact from seasonality, but shipment of products like TV and monitor outpaced the plan, slightly overperforming on the guidance. ASP per square meter fell 27% to $782, largely in line with the guidance from the previous quarter. The mix of mobile panel shrank, and there was relative impact from increased shipment of medium and large products, but mass production began for IT OLED and product mix improved.

Next, I would like to talk about the sales ratio for each product. In terms of seasonal sales, the sales ratio for mobile and other sectors recorded 28%, which fell by 16% compared to the previous quarter, while the sales ratio for other products increased relatively. The sales ratio for TV sectors recorded 28%, recorded 22% of sales, and the sales ratio of IT units increased by 10% with the focus on monitor products, and IT OLED mass production also started, and recorded 40%, which increased by 9% compared to the previous quarter. The sales ratio of auto units also recorded 10%, which increased by 3% compared to the previous quarter. The sales ratio of OLED products, except for seasonal effects,

Next is product revenue mix. The revenue mix of mobile and others was 28% of the total revenue, down 16 percentage points QOQ due to seasonality. This pushed up the revenue mix of other products. EV panel's revenue mix was 22%, up 4 percentage points from the previous quarter. IT was 40%, up 9 percentage points QOQ. On general growth in monitor shipment and the start of IT OLED mass production, auto was 10%, up 3 percentage points. Revenue mix of OLED products, excluding the seasonality, was 47%, up 2 percentage points year-on-year.

Next is the fiscal year and main indicators. Next is on the financial position and key metrics. Cash and cash equivalents stood at 3.225 trillion won.

Since the paid-in-capital increase in Q1, debt-to-equity ratio was 279%, improved by 29 percentage points from the previous quarter. Net debt-to-equity ratio was 145%, improved by 7 percentage points.

Next is the 2nd quarter guidance. The 2nd quarter guidance is the 2nd quarter guidance. The 2nd quarter guidance is the 2nd quarter guidance. Next is Q2 guidance. Area shipment is expected to grow by mid 20% level QOQ from increased shipment of medium and large products like TV and IT

and full-fledged mass production of IT OLED. ASP per square meter is expected to decline slightly by a low single-digit percentage due to the change in the product mix.

Next, CFO Sunghyun Kim will walk us through the key highlights.

Hello, this is CFO Kim Sunghyun.

Good morning and afternoon.

This is the CFO, Sung Hyun Kim. Thank you for joining our conference call.

Uncertainties in the external environment continue affecting macroeconomic factors like consumption,

which is prolonging the soft demand across panel products. For the short term, business performance will remain volatile due to factors like seasonality, but the company is trying to build a secure revenue structure for the mid to long term. We are trying to strengthen business competitiveness, lay the foundation for future businesses, and establish a stable revenue structure by focusing company-wide attention on activities to upgrade the business structure improve the cost structure and operational efficiency. Now allow me to explain the company's plan and strategy per business area.

In large OLED, we will strengthen our customer portfolio and solidify our position in the premium TV market with a focus on ultra-high definition,

ultra-large products applied with MetaTechnology 2.0 with higher luminance. We also aim to improve profitability based on cost innovations and volume expansion, resulting from improvement in yield, productivity, and material costs.

In the IT OLED segment of the medium-sized IT area, we will continue to develop products that apply Tandem OLED technology, which has excellent durability and performance, such as long-life, high-intensity, and low-power. In the IT OLED segment under medium IT,

We are currently mass producing the products that utilize tandem OLED, characterized by superior durability and performance like long life, high luminance, and low power. We plan to secure business results by ramping up production in earnest in Q2 and running the business on track as planned. This will not only help consolidate our position in the market based on stable mass production and technology leadership, but also to build the fundamentals for our business upgrade.

In the small mobile business, we will keep driving our market share in high-end smartphones.

by actively utilizing the expanded capacity of 45,000 and growing the shipment and mix of high-value ad products.

Next is the auto business sector. The company has a product portfolio that is different from the technology competitiveness such as PureLED, ATO, high-end LTPS LCD based on Tandem OLED technology. In the short term, demand variability may appear, but we will continue to increase the performance of the new stock and business performance based on a diverse product and technology portfolio, stable production capacity, and close customer relationship. In particular, in the case of car OLEDs, we are accelerating business expansion, continuously expanding customer expansion, new stock, and sales,

Next is auto business. We have technological competitiveness and differentiated product portfolio in such products as P-OLED and ATO based on tandem OLED technology and high-end LTPS LCD. Demand may be volatile in the short term, but we will keep working to win new orders and drive business performance based on our differentiated product and technology portfolio, reliable production capability, and close customer relations. Particularly in auto OLED, we are accelerating business expansion with the goal of further building up our position as the world's number one auto display player by winning new customers, new orders, and revenue.

Last is on our investment activities.

As has been reiterated, our CapEx is focused on essential investment and order-based business that is less susceptible to external environment and likely to yield quick returns. Investment this year is planned at $2.1 trillion level, a further reduction from last year's $3.6 trillion.

There are still uncertainties and changes in the market and overseas environment, but as I mentioned earlier, we are aiming for a turnaround based on high-end products based on high-end products centered on OLED in the second half of the year, continuing to improve performance and performance in each quarter. In addition, we are working to strengthen financial stability through the use of non-contracted assets such as UU Real Estate, which was announced today,

Although the market and external environment remain uncertain and volatile, we will try to sustain the improvement trend in our quarterly business performance and earnings through the aforementioned measures as we aim to reach a turnaround in the second half led by a higher mix of OLED-centered high-end products. We are also working to strengthen our financial soundness and improve our fundamentals by utilizing non-strategic assets such as the sale of idle real estate disclosed today. Thank you very much for your attention. That brings us to the end of earnings presentation for Q1 2024. We will now take your questions. Operator, please commence with the Q&A session.

Now Q&A session will begin. Please press star 1, that is star and 1 if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2, that is star and 2 on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. The first question will be provided by Sunwoo Kim from Merit Securities. Please go ahead with your question.

Hello, this is Sunwoo Kim from Merit Securities. Thank you for the presentation. I would like to ask you the most important question regarding financial structure and liquidity in the current situation. If you look at this financial statement, the first quarter's net income is in the late 13 trillion won range, and it has been staying at the 13 trillion won range since a year ago. Considering the uncertain market and foreign economic situation these days, I think it's a bit of a burden. Last year, you also said that you are resigning, and if you look at the recent media reports, it is known that TVCEP is pushing out of Gwangju. Thank you very much for the presentation.

Now, I have questions about the financial structure as well as cash liquidity, probably the two most important questions in today's environment. Now, the company's financial statement shows that the net borrowing at the end of Q1 was 13.8 trillion won, and we see that the net borrowing has been remaining at the 13 trillion won level since from a year ago. and which appears to be a bit on the higher side considering the current circumstances. Now, there has been the paid-in capital increase, and also there have been reports of the intention to sell off the Guangzhou LCD TV fab, and I wonder whether there are any target financial ratios for the company for the end of this year as well as next year. And also, aside from the sell-off of the Guangzhou LCD TV fab, are there any large-scale cash-in events that have been planned for the sake of stabilizing the financial ratios?

Yes, I will tell you about the CFO. It is a question that you are very well aware of the current situation. For the past few weeks, the net profit has been at the same level This is the CFO responding to your questions.

I see that the question is stemming from very good understanding of the specifics of the company. And yes, as has been rightly mentioned, the net borrowing has been remaining almost flat for the past few quarters. And also, as the questioner has pointed out, it is a bit burdensome given the current circumstances.

In the past two years, we have been in a situation where our profitability has been weakened. As you know, financial activities have been stable.

Now, for the past two years, the company's profitability has not been so robust, but as you would also be fully aware, our financial activities have been consistently ongoing despite the other circumstances.

As you mentioned earlier, you mentioned the CDTV factory sale in Gwangju. What the company can do is, You also mentioned the sell-off of the Guangzhou LCD TV FAB.

So basically what the company can do now is to keep strengthening our activities to maximize our business efficiency and effectiveness. So what we can do is improve the soundness of our assets, and for the assets that are deemed not to be strategic, then we can perhaps try to turn them into other types of assets.

First of all, you mentioned that financial activity is stable,

And I did mention that we have been consistently carrying on financial activities, but then I would say that at the fundamental level, the best financial response would be for our businesses to produce profits.

I've talked about this a number of times, but I won't repeat it again. I'm talking about it, and I think it's getting better little by little. So, in the end, I'm going to make some financial decisions through that fundamental business performance.

And so with regards to that, our continuous efforts have been reiterated several times, so I do not believe that they merit my repeating at this point. So we will continue with our efforts to improve our fundamental business performance, and we are now beginning to see some signs of getting good results out of it. So based on the results as well as the continued business performance, we will also be coming up with our financial plan accordingly.

The following question will be presented by Dongwon Kim from KB Securities. Please go ahead with your question.

Yes, thank you for the question. I will only ask one question related to Guangzhou LCD Factory. In the market, in terms of financial structure improvement and investment resources, I think you are interested in the development of Guangzhou Factory. However, if you look at TV set customers recently, I know that LG Display is also requesting an increase in LG Display to lower the dependence on the Chinese panel. Recently, with the improvement of the LCD TV market, Thank you for taking my question. It is going to be on the Guangzhou LCD Fab. Now, the market is quite keen on the sell-off of the Guangzhou LCD Fab.

for such purposes as improving the financial ratios and also the potential use of the investment funds. But also at the same time, some TV set makers recently requested volume increase from LG Display to hedge their reliance on Chinese makers. Then based on the recent improvement in the LCD TV market, Are there any changes to the company's plan on the sell-off of the Gwangju LCD TV Fab? And if not, meaning that if the current plan is to continue, then I would just like to ask for a broad update on the Gwangju LCD Fab sell-off. So, for example, the timeline of the expected sell-off as well as the plan for utilizing the proceeds.

Yes, I will tell you about the CFO. This is the CFO again responding to your question.

Now, a few years back, the company announced our decision to suspend our large LCD business, and since then, we have been executing this plan through a number of steps.

Therefore, we are not doing this to improve the fiscal efficiency or to use investment funds, but to make strategic decisions

So this means that what we are intending to do is not about improving the financial ratios or making more proceeds available to be used, but this is part of our execution of what was determined strategically.

In terms of the substance of the decision, we have shared with the market about the path that we intend to take.

But in terms of this specific approach, I must admit that perhaps we have not been fully clear yet.

I will not say this again. But we are working hard on something. And the result may be better than you expect. We have to wait and see. That's all I have to say. I will only tell you the details

And neither will I be clear this time, but what I can tell you is that we are working very hard, and the outcome might be better than what we expect, but in terms of the timing, we would have to wait and see. But again, in terms of the specific approach, please understand that we cannot be specific at this time. Thank you. We will take the next question.

The following question will be presented by Unho Kim from IVK Investment and Securities. Please go ahead with your question.

Thank you for the opportunity. I would like to ask about the business situation. I think this year's large TV OLED will be good for last year's debut as an increase in the volume of new customers. In addition, I think that the LCD IT product and the IT OLED business will be a very important axis for this year's performance improvement. First of all, how is the demand for LCD products? What is the price of these panels? I wonder if you can tell us about the future. And secondly, you mentioned it during the performance announcement earlier. You said that you have mass-produced the IT OLED business, and from the second quarter, you are saying that the volume will increase quite a bit. I wonder how much the annual goal will be this year. And what you've been talking about since last year is Thank you for taking my questions. I will be asking about the sales environment. Now, since a few years back, we see that the large OLED has been increasing and also

the large OLED is likely to expand year over year, especially thanks to the new customer and also the increased volume for the new customer. And also the LCD IT products and the IT OLED are likely to be the main drivers of performance improvement this year along with the large OLED. So then what is the company's projection for the demand for the mid-sized LCD products? And also, if possible, what is the company's projection for the panel prices as well? And the second question is, as was explained during the presentation, the company started the mass production of IT OLED, and it seems as if the volume is set to increase quite rapidly in the second quarter of this year. Then with the IT OLED, what is the company's goal in terms of the annual production? and also the company has been putting a lot of stock on the order-based business so the company has great vision for the order-based business so what is also the company's expectation of the performance coming out of this

This is Wonjae Lee in charge of medium display marketing responding to the first part of the question. Now for the mid-sized LCD market,

There has been negative growth recently because of some macroeconomic environment and impact. But then more recently, what we are seeing is signals of growth in the sales of monitors, especially in the B2C market, in developed markets, and in the emerging markets as well.

According to the rise in TV panel prices, there will be a gradual increase The increase in the price of IT panels has also been seen, and after 25 years, it is expected to improve the conditions of corporate IT consumption and replace them. It is expected to improve from the second half of this year.

Along with the rise in the TV panel prices, the prices of IT panels have also been increasing. And we expect the demand to start picking up in 2025 and on, on the back of the replacement cycle coming up, and also with improved IT consumption environment among the businesses. And as a result, we believe that starting from the second half of the year, the market environment is going to start improving.

Yes, I'm Kim Yong-won, the marketing director of SoYong. Before answering the questions related to the IT OLED panel, the detailed production plan is related to the customer-related content, so please excuse me for not being able to tell you in detail. However, the IT OLED panel is based on the technology leadership of the company, And this is Yongwon Kim in charge of small display marketing responding to a question about the OLED panels for IT. But before I give my answer to this particular question, please understand that

Regarding the specifics about our mass production plan, we cannot disclose them because they involve client situations. And now for the IT OLED, based on our technology leadership, we have begun the mass production as was mentioned in the first quarter based on our plan, and we are currently moving on without a hitch. And in terms of the upgrade to our business structure, it is something that can further strengthen the company's business fundamentals, and we are looking forward to seeing the results out of these efforts.

Thank you, and we will now take one more question.

The next question is from Kim Sowon from Kium Securities. The following question will be presented by Sowon Kim from Kium Securities. Please go ahead with your question.

Hello, I'm Kim Sowon from Kium Securities. Thank you for your question. I would like to ask a question related to P.O. Red. Recently, there has been a decrease in the number of China-priced goods in North American strategic companies, and there are concerns about the supply chain. So, while the competition with the smartphone market is intensifying, I wonder if there will be any changes in the supply of P.O.L.E.D. for mobile phones this year. Also, there were some issues during the initial supply of P.O.L.E.D. for new models for the last two years. If there is anything that has been updated such as our competitiveness or preparation situation for strengthening the customer base and securing sales, please let us know. Thank you.

Thank you for taking my question, which is on P-OLED. Now, the North American customer has been seeing sluggish sales in the Chinese region. And as a result, I understand that there have been some, let's say, concerns about the supply chain overall, especially regarding the annual demand. And also, given the fact that the smartphone market has become saturated, and the competition continues to intensify. So are there any changes to the company's target annual shipment for 2024? And also in the past two years, there have been some issues, especially in the early stage of supply. So what is the company's competitive strategy to further strengthen your position as the vendor among the customers and to secure reliable profitability.

My name is Yong-Hoon Kim, and I am in charge of small business marketing. I would like to clarify that I cannot answer any specific questions regarding the customer service. Based on the expanded production capacity and enhanced capacity last year, we expect the number of panels to expand compared to last year, We are looking forward to improvements in terms of sales and profits this year. We have a system that allows us to quickly cooperate with customers in terms of technology production operations, and I think that we are also accumulating a lot of experience in terms of efficiency and overall productivity compared to the past. We plan to provide fewer products and continue to make results. That's all.

This is Yongwon Kim in charge of small display marketing responding to this question. Now, once again, please ask for understanding that I cannot disclose details or specifics with regards to the customer. Now, based on the expanded production capacity and strengthened capability, we believe that the panel shipment is going to grow year on year, which is also going to translate into improvement in revenue and profits. Now, we have a system in place to collaborate very quickly with customers in technology, production, and operations. And also on the yield and productivity side, we have also built up more advanced experience, much more so than before. So we believe that this places us in a very good position to supply our products in a timely manner and continue to broaden our performance.

Please do contact us at the IR team for any additional questions. Thank you.