Lg Elec S/Gdr 144A

Good morning and good afternoon. Thank you for joining LG Electronics' earnings call for the second quarter of 2020. This conference call will start with a presentation on our earnings result, followed by a Q&A session, at which time, if you wish to ask a question, you will need to press star and 1 on your telephone. I would now like to hand the conference over to the first speaker. Good afternoon. My name is Sangbo Shim from Investor Relations. Thank you for joining LG Electronics Earnings Release Conference Call for the second quarter of 2020. With me are representatives of financial planning division of each business, Mr. Egon Kim from Home Appliance and Air Solutions, Mr. Jin Oh Ha from Home Entertainment, Mr. Dong Myung Seo from Mobile Communications, Mr. Geun Tae Kim from Vehicle Component Solutions, Mr. Kyoo Sun Hwang from Business Solutions, We are also joined by Mr. Kim Yo-Kim from Accounting Division, Mr. Jeong-I Lee from Business Planning Division, and Mr. Hyung-Yoo Lee from Finance Division. Please be noted that all statements we'll be making today regarding our financial results of the second quarter are subject to change in accordance with the results of the external review. I would also like to remind you that uncertainties in the market and changes in strategies may cause our results to be different from the outlooks and forward-looking statements today. Today's call is joined by participants, both from home and abroad. The call will be conducted in Korean and translated into English. First, I will outline the overall performance result of the second quarter and outlook of the third quarter. and each division will take turn to deliver its business results and outlook. Let me start with the consolidated financial results of the second quarter and the outlook of the third quarter of the year 2020. Consolidated sales of the second quarter was $12.8 trillion won and operating income was $495.4 billion won. Consolidated sales recorded negative growth quarter-on-quarter and year-on-year as distributors shut down offline stores and auto OEMs suspended production in the wake of coronavirus pandemic. Despite a decrease in sales, we achieved solid profitability thanks to enhanced efficiency in cost structure and increased sales in healthcare products such as those with steam functions. I'll now briefly review the second quarter performance of each business. H&A recorded 5.2 trillion won in sales, 628 billion won in operating income, and 12.2% in profitability. H&E recorded 2.3 trillion won in sales, 112.8 billion won in operating income, and 5% in profitability. MC recorded 1.3 trillion won in sales and 206.5 billion won in operating loss. VS recorded 912.2 billion won in sales and 202.5 billion won in operating loss. VS recorded 1.3 trillion won in sales, 98.3 billion won in operating income, and 7.5% in profitability. Further details by business, will be covered in later slides. Let's move on to the profit and loss and cash flow of the second quarter. In terms of profit and loss, our net income, reflecting financial income and expense, equity method gain and loss, other non-operating income, and corporate income tax, posted $65.6 billion. Cash flow from operating activities of the second quarter was about 1.4 trillion won, and cash flow from investment activities was negative 507.6 billion won. As a result, net cash flow amounted to 892.2 billion won, and when reflecting negative 290.2 billion won of cash flow from financial activities, Cash balance at the end of the second quarter was about 5.5 trillion won, an increase by 602 billion won quarter on quarter. Next is key financial position and indicators for the second quarter of 2020. As of the end of the second quarter, our assets stood at 44.8 trillion won, liability at 27.4 trillion won, and equity at 17.4 trillion won. All leverage ratios, liability to equity, debt to equity, and net debt to equity decreased quarter on quarter, maintaining healthy financial condition. Next, the third quarter outlook. In terms of business environment, uncertainties still remain in the market, with the possibility of a resurgence of COVID-19 and trade dispute between the US and China. However, central banks and governments are expected to continue with monetary and fiscal policies to boost the economy, which is likely to turn around after reaching a trough in the second quarter. Accordingly, while continuing to secure foothold in non-face-to-face and healthcare business, which has become a new normal in the post-COVID-19 world, we will continue to identify opportunities amid this crisis and build growth momentum. Despite lingering uncertainties in the third quarter, our sales and profitability is expected to be similar as the same period of the last year. Now, let's move on to the second quarter results and third quarter outlook by business. First is H&A.

Let me share the second quarter result of H&A.

Due to sales disruption in Korea and overseas caused by the impact of COVID-19, sales recorded 5.2 trillion won, a decrease by 16% year-on-year. In terms of profit, despite favorable factors of improved cost structure and reduction of expenditure, operating income decreased year-on-year because of the sales drop triggered by COVID-19. In the third quarter, Uncertainties in the business environment is expected to continue with estimates of a prolonged COVID-19 crisis and worsening conflict between the US and China. However, sales is expected to turn around in the third quarter with the gradual improvement of the business environment. And we plan to focus on achieving profitability similar or higher than that of the previous year by improving our cost structure and optimizing resources. Let me share the second quarter result of HE. Our sales decreased quarter on quarter and year on year due to country lockdowns and shutdown of offline stores following the global spread of COVID-19. In terms of profit, we maintained profitability similar to that of the previous year by continuously reducing material costs and cutting controllable expenses, including marketing costs. Now, let me share the outlook for the third quarter. Despite economic stagnation brought by the coronavirus pandemic, TB demand is likely to recover gradually starting from the third quarter, especially in the advanced market. We plan to increase sales and recover profitability on a quarter-on-quarter and year-on-year basis by boosting sales of premium TVs such as OLED, NanoCell, and large-size TVs, expanding online sales, and enhancing efficiency of resource management.