Lg Elec S/Gdr 144A

Good morning and good afternoon. Thank you for joining LG Electronics earnings release conference call for the third quarter of 2020. This conference call will start with a presentation on our earnings results followed by a Q&A session. At which time, if you wish to ask a question, you will need to press star and one 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 third quarter of 2020. With me are representatives of the Financial Planning Division of each business, Mr. Lee Kwon Kim from Home Appliance and Air Solutions, Mr. Jin Oh Ha from Home Entertainment, Mr. Dong Myung Seo from Mobile Communication, Mr. Koon Tae Kim from Vehicle Component Solutions, Mr. Kyu Sun Hwang from Business Solutions, We are also joined by Mr. Mingyu Kim from Accounting Division, Mr. Chongyi Li from Business Planning Division, and Mr. Hyunkyu Lee from Finance Division. Please be noted that all statements we will be making today regarding our financial results of the third quarter are subject to change in accordance with the result of the external review. I would also like to remind you that uncertainties in the market and changes in strategies E E E E E E E Consolidated sales of the third quarter was 16.9 trillion won and operating income was 959 billion won. Consolidated sales recorded high growth quarter-on-quarter and year-on-year driven by pent-up demand increase of home appliance and TV as well as increase in premium product sales despite the COVID-19 pandemic. As for profitability, we achieved third quarter record high thanks to recovery of vehicle component demand and increase in major product sales such as home appliance and TV. I will now briefly review the third quarter performance of each business. H&A recorded $6.2 trillion in sales, $671.5 billion in operating income, and 10.9% in profitability. AG recorded 3.7 trillion won in sales, 326.6 billion won in operating income, and 8.9% in profitability. MC recorded 1.5 trillion won in sales and 148.4 billion won in operating loss. GS recorded 1.7 trillion won in sales and 66.2 billion won in operating loss. And lastly, BS recorded $1.5 trillion in sales, $77 billion in operating income, and 5.2% 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 third 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 expense, and corporate income tax posted 649.2 billion won. Cash flow from operating activities of the third quarter was about 1.6 trillion won and cash flow from investment activities was negative 511.2 billion won. As a result, net cash flow amounted to 1.1 trillion won and when reflecting 57.2 billion won of cash flow from financial activities, cash balance at the end of the third quarter was about 6.6 trillion won and increased by 1.1 trillion won quarter on quarter. Next is the key financial position and indicators for the third quarter of 2020. As of the end of the third quarter, our assets stood at 49.4 trillion won, liability at 31.6 trillion won, and equity at 17.8 trillion won. As for leverage ratios, liability to equity increased quarter on quarter as account payable increased to respond to supply mount resulting from demand recovery, but debt to equity and net debt to equity decreased quarter on quarter. Next is fourth quarter outlook. In terms of business environment, there still exists industrial activity uncertainty risk due to slow recovery of the real economy and COVID-19 global risk spread along with the re-strengthening of movement restriction. Nonetheless, low interest rate trend and additional physical policies to boost the economy will be maintained for the time being. And new business opportunities coexist as non-face-to-face trend expands and consumer spending pattern changes. Accordingly, it is predicted that COVID-19 pandemic will serve as a momentum to raise brand awareness. Efforts to expand online sales, new growth products, and OLED TV sales will be continued to maintain growth momentum. And through efficient resource management, fourth quarter sales and profitability is expected to stand higher than the same period of last year. Now, let's move on to the third quarter results and fourth quarter outlook by business. First is H&A. The third quarter results of H&A. Sales shifted back to growth trend in both Korea and overseas. Sales recorded 6.2 trillion won, an increase of 15% year on year. In terms of profit, It improved significantly year-on-year and recorded a double-digit base driven by sales growth in all regions and cost structure improvement. In the fourth quarter, competition in the market is expected to intensify due to delayed recovery of emerging market demand caused by the prolonged COVID-19 situation and the beginning of the fourth quarter promotion season. However, sales is expected to maintain a double-digit growth rate following the previous 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 conducting cost optimization activities. Let me share the third quarter results of HE. sales increased year-on-year driven by demand increase in advanced markets such as North America and Europe, and also increased in online sales and premium product sales such as OLED and NanoCell TVs supported the jump. In terms of profit, it improved year-on-year thanks to sales growth and premium product sales increase even though there were cost-aggravating factors caused by LCD panel price increase. Now, let me share the outlook for the fourth quarter. Market is expected to grow during the high-demand season, but risk factors such as intense price competition and increase in LCD panel price is also predicted. We plan to achieve profitability similar or higher than that of the previous year by expanding the sales proportion of premium TVs such as OLED, NanoCell, and large-size TVs strengthening online sales and enhancing efficiency of resource management such as marketing expense and inventories. That is all. Let me share the third quarter results of MC. Sales increased by 17% quarter on quarter driven by gradual recovery in global demand and increased sales in major markets such as North America and South Central America. but remained at the similar level year-on-year due to supply issues caused by 4G chipset shortage. In terms of profit, although marketing expense slightly went up due to new model launch, it improved quarter-on-quarter and year-on-year thanks to increased efficiency of production sites and cost-saving effect of ODM expansion along with solid sales in mass tier models. Now the fourth quarter outlook. With the launch of 5G smartphones from competitors, 5G market is expected to show a significant growth, and market demand is expected to increase quarter on quarter, and demand is predicted to recover to the level of the fourth quarter last year. With the launch of the new form factor, LG Wing, we will focus on expanding sales by strengthening mass tier lineups focusing on target markets such as North America and South Central America and also improve our profit structure through continued operation efficiency. Let me share the third quarter results of VS. Sales increased by 24% year-on-year as automobile manufacturers in North America and Europe, our main OEMs, have resumed production in COVID-19 pandemic situation. and as a result, demand for vehicle components is recovering. As for profit, operating income improves slightly year-on-year, driven by sales growth, resulting from vehicle components' demand recovery and cost management efforts, such as material and fixed cost reduction. For our fourth quarter outlook, recovering the automobile market to pre-COVID-19 level is predicted to be delayed, however, connected and Electric vehicle business sectors are expected to show high growth. Accordingly, we will maximize sales through intense supply chain management to respond to market recovery trends and improve product structure through ongoing cost management. Let me share the third quarter results of BS. Sales increased by 13% quarter-on-quarter despite difficulties in B2B business thanks to the non-contact trend created from the prolonged COVID-19 pandemic but decreased by 2% year-on-year. In terms of profit, operating income decreased quarter-on-quarter and year-on-year due to sales decline and increased price competition. In the fourth quarter, Amid the prolonged COVID-19 pandemic and contact-free environment, we will see increase in market demand in certain product groups related to contact-free and new normal trends, but business opportunities and trends such as reduced corporate investment and fierce price competition will both exist. We expect those to grow year-on-year as we actively tap into sales opportunities of products related to non-face-to-face services, expand strategic product sales, improve product competitiveness, and strengthen online marketing activities. That brings us to the end of the third quarter earnings release and fourth quarter outlook. We will now take questions.

The first question will be provided by Dongwon Kim from KB Securities. Please go ahead with your question. Yes, hello. I am Dongwon Kim from KB Securities. Thank you for the opportunity to ask a question.

I would like to ask a question to the V.S. business department, which is a power supply department and a power supply department. First of all, traditionally, the performance of LG Electronics in the fourth quarter is due to an increase in supply burden and marketing costs, Elec S & Gdr 144A