LG Display Co., Ltd.

Hello, I'm Heo Seok, team leader of LG Display IR team. I'd like to thank those who attended the 2nd quarter performance announcement conference call in 2024. Today's conference call includes CEO Kim Sung-hyun, management manager Lim Seung-min, financial manager Kim Kyu-dong, business intelligence manager Lee Ki-young, large-scale planning manager Kim Jong-deok, medium-scale planning manager Ahn Yoo-shin,

Good morning and good afternoon. This is Brian Hall 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 the CFO, Sungyeon Kim, Seungmin Im, Senior Vice President of Corporate Planning, Kyudong Kim, Vice President of Finance, Kiyoung Lee, in charge of Business Intelligence, Jongdeok Kim, Vice President of Large Display Planning and Management, Yu Shin-an, in charge of Medium Display Planning and Management, Seungyong Paek, in charge of Small Display Planning and Management, and Moon Tae-hwang, in charge of Auto Planning and Management.

The conference call will be held in the same way as the Gugyeomun conference call. The relevant data related to the results will be shared with the Gugyeomun

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 for Q2 2024.

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. I will start with Q2 business results.

Revenue in Q2 was 6.708 trillion won, up 28% QOQ and 42% YOY. Shipment increased in all product categories, with a notable growth in shipment and mix of OLED products, where the company has differentiated advantage.

SONIC's IT OLED panels have been mass-produced, and large OLED panels have been produced, 점차 확대되는 가운데 우호적인 환율 상황도 실적에 긍정적으로 작용하였습니다. 이를 바탕으로 전분기와 전년 동기 대비 격자폭을 크게 축소하며 940억 원의 영업 손실을 기록했습니다. Operating laws posted 94 billion won representing a significant decline QOQ and YOI. The company's effort for business structure upgrade continues to produce tangible results.

including the full-fledged mass production of IT OLED panels and growth in production of large OLED panels. Favorable foreign exchange conditions also contributed to earnings improvement.

The second quarter of the year, the second quarter of the year, the second quarter of the year, the second quarter of the year, the second quarter of the year, the second quarter of the year, each increased by 23% and 37% and recorded 6.5 million square meters. This is the level that corresponds to the fall guidance suggested by the air blower. In the case of area-by-area evaluation, the guidance of the initial drop in the number of patients was significantly improved. The fall of small product groups such as mobile and OLED was affected by the fall,

Next, on area shipment and ASP per square meter. Area shipment of notebook PC and LCD TV products was slightly lower than planned, but Q2 area shipment was up 23% QOQ and 37% YOY to 6.5 million square meters, largely in line with the guidance from the previous quarter. ASP per square meter slightly outperformed on the guidance, which projected a slight decline by a low single-digit percent. With increased shipment of small OLED panels such as mobile panels, ASP per square meter was $779 almost flat Q&Q. Next, I would like to talk about the sales of each product.

In the TV segment, OLED and LCD panel output increased overall, It recorded a 24% increase of 3% points compared to the previous quarter. The IT sector's sales volume was recorded at 44%, which was a 3% point increase compared to the previous quarter due to the real-time production of the IT-type OLED panel. Accordingly, the sales volume of the mobile and other sectors fell relatively and recorded 23%. The sales volume of the auto sector is 9%. Next is product revenue mix. The revenue mix of TV panels was 24%, up 3 percentage points from the previous quarter, with increased shipment of OLED and LCD panels.

IT was 44%, up 3 percentage points QOQ, with the full-fledged mass production of IT OLED. This pushed down the relative revenue mix of mobile and others to 23%. Auto was 9%. Overall, the revenue mix of OLED products was 52%, up 10 percentage points year-over-year, and 5 percentage points QOQ, showing visible impact of business structure upgrade.

Next is on the financial position and key matrix. Cash and cash equivalents stood at 2.342 trillion won.

Inventory was 3.082 trillion won, down QOQ, driven by shipment growth. Debt-to-equity ratio was 282%, and net debt-to-equity ratio was 151%. Next is the guidance for the third quarter.

The increase in panel purchases for medium-sized products such as TV and IT and the increase in seasonal maturity, Next is Q3 guidance. Area shipment is expected to grow by mid-single digit percent level, QOQ,

from increased panel purchase for medium and large products like TV and IT, as well as growth in seasonal demand. ASP per square meter is expected to remain flat without much volatility. Shipment of OLED panels, including mobile panels, is expected to expand, but shipment of medium and large products is also expected to grow.

Next, let's look at the highlights of CEO Kim Sung-hyun.

Next, CFO Sung-Yeon Kim will walk us through the key highlights.

Good morning and good afternoon. This is CFO Sung-Yeon Kim. Thank you for joining our conference call. We are improving our performance compared to last year and strengthening our financial stability. However, since the exchange environment is changing rapidly, we believe that there are still many changes in the situation and exchange rate of the entire market for TV, IT, and other applications. We will continue to improve our business performance through the expansion of the business structure of OLED, but we will continue to improve our business performance through the expansion of the business structure of OLED,

The company is posting better earnings than the previous year and strengthening financial stability through business structure upgrade, cost structure improvement, and cost innovation, as well as operational efficiency enhancement. Nevertheless, external situations remain highly volatile, so we believe that there are still several factors that may affect our performance, including foreign exchange situations, and the downstream industry circumstances for each application, such as TV and IT. Against this backdrop, the company will strive to improve business results through business structure upgrade focused on OLED, while responding to market uncertainties through efforts like operational efficiency.

If I were to tell you about the plans and strategies for the second half of the year, the small and medium-sized mobile businesses will be able to compete with each other

As for the company's plan and strategy per business area in the second half of the year, in the small mobile business, we aim to achieve a YOY increase in shipment based on the expanded infrastructure and production capacity, which is expected to bring about meaningful improvement in our revenue and profit.

In the IT OLED area, we launched a stable mass production of tandem technology-based leadership in the second quarter. In the case of IT LCD, the recovery is delayed and the competition between the panel companies is intensifying, but we believe that the individual's individual competitiveness is still advantageous, and we have a stable customer relationship.

In the IT OLED segment under medium IT, we increased shipment in Q2 after the start of stable mesh production based on tandem technology leadership. As for IT LCD, while the market is slow to recover, and competition among panel makers is intensifying, we are confident in the company's differentiated competitive edge. Our portfolio strategy, focused on stable customer relationships and high-end B2B products, is expected to produce differentiated outcomes when the market is fully recovered after the second half of the year.

Daewong OLED is a company that has been working closely with global strategy customers

In large OLED, our priority is to secure profitability. To this end, we're expanding differentiated and high-end lineup that reflects market and customer needs through close cooperation with our global strategic customers. and pursuing product competitiveness and innovation in operational structure.

Next is the auto business sector. In the short term, it is judged that there are some changes in the overall market due to the reduction in electric vehicle subsidy benefits, but in the case of self-propelled vehicles, there are some changes in the product technology portfolio Next is auto business.

There are some elements of short-term volatility in the downstream market, mainly due to reduced incentives for EVs, but we are carrying out activities to win orders as planned across both EVs and ICEs based on differentiated product and technology portfolio involving OLED and LTPS LCD and through stable and close customer relationships. We will continue to expand into larger market segments by raising the mix of OLED and using competitive ATO products, which is Advanced Thin OLED. Our more diversified product portfolio will help sustain the growth momentum.

In the end, I would like to talk about investment activities. CapEx is focusing on business that can achieve performance in the future and essential normal investment. Through this, this year's investment is the largest investment

Last is on our investment activities. We're focusing on essential investments in projects that can secure results early based on a careful consideration of external environment and demand growth. Investment this year is planned at a 2 trillion won level, a significant reduction from the previous year.

Although the market and external environment are likely to remain volatile in the second half of the year,

and conducting profitability-centered business management supported by gains in operational efficiency. Thank you.

That brings us to the end of earnings presentation for Q2 2024. We will now take 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 Dongwon Kim from KB Securities. Please go ahead with your question.

Thank you for taking my questions. I'd like to pose questions on your overall business performance and projection.

In the first half of this year, for two quarters in a row, you have posted earnings that exceeded market expectations. So, what is your outlook on the likelihood or probability of making a turnaround in the third quarter, and what is your estimated size of profit in the second half of the year? Thank you.

We are currently focusing on the turnaround process, and it is true that there were meaningful achievements in the first and second quarter, but I think it is necessary to approach financial performance in a market situation where there are still many variables.

I am Insumin, Senior Vice President for Corporate Planning. Thank you for your question. The company is currently focusing on making a turnaround, and we have posted positive results in the first and the second quarter this year. However, we still believe that there are many elements of volatility in the market, so we need to take caution in making any projections going forward.

Also, the market is very volatile. However, we see that the external circumstances are still quite volatile, and there are several factors that may impact our business performance, including the

a demand in the downstream industry for major product categories, and there's quite a lot of uncertainties in this regard.

In particular, in relation to the three-minute performance forecast, we are currently working on non-adjustment activities, including non-adjustment activities for production employees, so I think we need to consider such situations that can be applied in the third quarter.

When it comes to making an outlook on the third quarter of business performance, we are currently going through a voluntary retirement program for production workers, and there will be some headcount adjustment, and this will have some impact on our business performance in the third quarter.

However, from the company's point of view, in addition to the high-speed business structure project that we have conducted in advance, across the company we have been implementing initiatives for business structure upgrade as well as implementing activities to improve the cost structure and cost innovation and improve operational efficiency

and such efforts will continue into the second half of the year.

We will take the next question. The following question will be presented by Sunwoo Kim from Merit Securities. Please go ahead with your question.

Hello, I am Sunwoo Kim from Merit Securities. I would like to ask you a question about the auction of the Guangzhou Factory. Recently, it seems that rumors are becoming more and more specific that the auction point, scale, and other trading partners have been decided. There were also news that the deal was hit. Please update us on how the process went. Also, after the auction, are there any plans to use the auction funds or to increase the capex? Thank you for taking my questions.

I'd like to ask questions regarding your plans for the sell-off of the Guangzhou TV FAB. Recently, there have been some specific rumors and speculations that there have been some decisions on the timeline and the size and the potential buyer for this FAB. And so there was some news that the deal would soon be closed. So if you could provide us with some updates on this matter, we would appreciate that. And I would also like to know your plans on how you're going to use sales proceeds from this transaction and any plans for expansion of the K-PACs. And if you do plan to expand the K-PACs, in what areas are you going to increase your spending? Thank you.

Yes. Actually, this question has been repeated, and I have never told you that it is always the other way around. However, we are thinking a lot about the oil and gas strategy, and we are doing something. And I told you that there are various ways to do it, but the media or analysts say that it is the other way around. It's the same way. Something is going on, it's true that there are relatives, and it's more specific than what I said last time.

This is our CFO, Sung-Yeon Kim, responding to your questions. Indeed, we have received similar questions in the past. However, I have not mentioned anything about a sale-off or sales in the past. But the message that I've been communicating to the market so far was that we are thinking about how we are going to utilize non-strategic assets, and there are many options that we are considering. Even though I made these remarks, the news and the market seem to conclude that efforts are going on for the sale of this fab. So let me make that once again clear and I'm going to deliver the same message that efforts are underway in many different ways and there has been some progress and there have been some more specifics coming out and that is the current situation. Regardless of one option we ultimately take, it will take quite some time before we can strategically utilize the assets under target. So whatever actions we take going forward, the final outcome of such actions will become materialized at a later time than what you expect. Of course, in the process, we will actively communicate with the market to provide you with updates. And you mentioned that there's some news that the deal is soon to be closed, and I would like to know the definition of soon. Anyhow, we are going to continue to update you. So if you stay patient, we will come back to you. Thank you.

The question you are curious about is where you will use the money when the strategic assets are liquidated.

The second part of your question, as many people may be wondering, that when we liquidate non-strategic assets, they will produce some proceeds, and you'd like to know how and where we're going to use these proceeds.

And upon that question, we're going to address this question once we have everything settled out.

We will take the next question. Thank you.

We will take the next question. The following question will be presented by Won Seok Jung from High Investment and Securities. Please go ahead with your question.

Hello. I am Won Seok Jung from High Investment and Securities. I would like to ask a question related to mobile smartphones. Unlike the past 1-2 years, this year, as reported in the press, mass production was carried out for the North American company in the early stage. In that regard, there was an additional stock investment last year, and in the market, Thank you for taking my question. I'd like to ask a question about the mobile market situation. Unlike the past two years, earlier this year there were some news reports that LG Display will

have gotten the early approval and will start mass production as scheduled. And there was some investment for capacity expansion last year, and there's high expectation for the growth of AI-related demand in the market. So if you could provide us with some color on the smartphone OLED shipment in the first and the second half of the year, we would appreciate that.

Yes, I'm Baek Seung-yong, and I'm in charge of small business management. In the case of the smartphone business, the customer base is a bit limited, so it is difficult to provide specific information on supply and demand. However, based on the market situation, the entire smartphone market is a bit less developed and the competition between companies is a bit worse. However, according to the survey, the smartphone based on OLED, which the company is focusing on, is expected to grow in the small-scale market.

I am Seungyong Baek in charge of small display planning and management. First, I'd like to ask you for your understanding that we will not be able to provide you with any specifics on plans for mass production and shipment because of our customer situation. However, based on the current market situation, what I can say is that the overall smartphone market growth will be slow and competition among the smartphone makers will continue to intensify. However, according to a research institution's report, the plastic OLED-based smartphone market is expected to grow by a small margin. This is where we are focusing on right now.

For the past two years, the company has had some issues with initial supply, but this year, we expect to show a different look from the past with less production and a stable supply system. Based on enhanced production capacity and expanded production infrastructure,

For the past two years, we had some issues in the early supply of OLED panels for smartphones. However, this year, we already put in place plans and infrastructure for a timely mass production and stable supply, so we believe that we will be able to produce positive outcomes. And we're planning to increase our panel shipment compared to the previous year based on the strengthened production capacity and expanded production infrastructure, which is expected to bring about positive improvement in our revenue and profit.

We will take the next question.

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

Hello, I am Sowon Kim from Kiyom Securities. I would like to ask a question from the ITLCB. You have been running your business as a high-end ITLCB, but I am curious if you are still looking at it as a high-end product-centered company. Thank you for taking my questions. My questions are concerning ITLCD. You've been focusing on high-value elite products, and I'd like to know if you still believe that the high-end product portfolio is your differentiating

I would also like to understand your overall projection for the strategy and the profitability of IT, LCD, going forward. And what is your prediction on the market situation for each IT application product in the first and the second half of the year?

I'm Ahn Yoo-Sin, and I'm in charge of business planning. First of all, the recovery of the IT market is being delayed, and the competition between the panel companies is getting worse, but I still think that the ability to withstand the discrimination owned by the party is still effective. Currently, the portfolio strategy centered on stable customer relations, high-end, and B2B is expected to show differentiated results when the market is normalized.

I am Yuxin An in charge of medium display planning and management. We are seeing the delay in the recovery of the IT industry and intensifying competition among the panel makers, but we are still very confident in the differentiating aspect of the product portfolio that LG Display has and the potential of the IT industry. We boast stable and close customer relationships and a portfolio strategy focused on high-end and B2B customers and these are going to lead to differentiated outcomes when the market is fully normalized. We're operating based on the assumption that external environment will continue to be uncertain for a long time. And we are implementing various measures to cut costs in terms of production, operation, and thought optimization. And these are our initiatives to transform our business structure to one that can be profitable even under the current market situations like what we have now. And we will make sure to produce positive results going forward.

Moving on to the market situations for IT applications, they vary by IT application category.

As for the monitors, the movement may be different by B2C and B2B, as well as the leading products by brands. But overall, on the annual basis, we see that the set and the panel is going to grow by a slight margin.

However, it seems that the recovery of the high-end market with the strength of the company will take some time, so we are carefully monitoring the demand in the second half of the year. Lastly, we expect that the price of the IT panel will maintain a balance of the year overall.

Compared to the monitor, the notebook PC is expected to be rather sluggish. On the set area, there is a negative growth expected by a slight margin, but the panel demand is expected to grow compared to the previous year. However, the high-end market is likely to be slow in its recovery. This is where we have competitive advantage. So we are carefully monitoring the demand trend in the market. And finally, the panel price for IT applications is expected to remain flat on a year-over-year basis.

The following question will be presented by Kyuha Lee from NH Investment and Securities. Please go ahead with your question.

I'd like to ask questions about your large display business. In the medium to long term, what is your expected timeline of making a turnaround for large OLED business?

and what kinds of specific strategies are you implementing to make it a profitable business?

Hello, I'm Director Kim Jong-Duk, Director of Big Project Management. Regarding your question, first of all, not only big OLEDs, but also LCDs, the overall growth of the PV market,

I am Jongdeok Kim, Vice President of Large Display Planning and Management. Responding to your question, we expect that there will be structural sluggish growth in the TV market that includes both large OLED and LCD TV sets, and we believe that there will be continued volatility in the market for some time.

So against this backdrop, rather than just expecting that the market situations will improve,

we have been implementing various measures internally to improve our business performance.

These efforts are focused on three main areas, product,

operational efficiency enhancement, and close cooperation with our strategic customers.

We are preparing a product that has improved performance compared to existing products and is differentiated in terms of cost competitiveness. On the inside, we are continuously working on cost reduction for factory operations through operational innovation. Finally, through close cooperation with strategic customers,

In terms of product development, we are currently developing and preparing for differentiated products that have better performance and better cost competitiveness compared to the existing products. And as for operational efficiency, we are working to enhance operational efficiency of the manufacturing plants as well as reducing costs. And finally, we're working closely with our strategic customers to expand the differentiated and high-end lineups that reflect market and customer needs. So we will continue to make efforts in these three main areas. And at the same time, the different, the armitization and depreciation of the investments that we made so far will be finished in the second half of next year, from which point we are expecting a meaningful improvement in our profitability.

Yes, I will take one more question at the end.

We will take the last question. The following question will be presented by Hyun Nam-goong from Shinhan Investment and Securities. Please go ahead with your question.

Hello, I'm Nam Goong-hyun from Shinhan Investment and Securities. Thank you for the opportunity to ask a question. You mentioned about electric vehicles earlier. Thank you for taking my question. You mentioned about the EV business in your presentation and there's currently some chasm in the EV market and there's some sluggish or struggling performance of the global EV makers.

So I'd like to understand your overall annual projection on the revenue and the growth rate for 2024 for your auto business and the remaining order balance.

Yes, hello. I'm Hwang Moon-tae, and I'm in charge of the auto planning. First of all, in terms of cash-in, as I mentioned earlier, due to the reduction in the benefit of electric vehicles and the lack of infrastructure, there will be a short-term increase in electric vehicle demand

I am Moon Tae Hwang in charge of auto planning and management. With respect to the current chasm in the market, as was mentioned in the presentation, there were reduced incentives for EVs and there's lack of infrastructure for EVs currently. So we see that there are many elements of volatility in terms of EV demand in the short term.

However, for LG Display, we have differentiated product and technology portfolio focused on OLED and LTPS LCD.

Also, based on very stable and tight customer relationships, we are carrying out activities as planned to gain revenue and win orders.

Also, based on very stable and tight customer relationships, we are carrying out activities as planned to gain revenue and win orders.

I will not be able to give you any specific numbers when it comes to our revenue target, but our target for revenue on an year-over-year basis is to grow the revenue by a mid-10% level. And our outstanding order balance growth rate is targeted to be similar as the growth rate of the revenue.

We will now close Q2 2024 earnings conference call. Thank you once again for joining us today. Please contact us at the IR team for any additional questions. Thank you.