Lg Elec S/Gdr 144A

Good morning and good afternoon. Thank you for joining LG Electronics Earnings Release Conference Call for the second quarter of 2022. This conference call will start with a presentation on the earnings results, followed by a Q&A session, at which time, if you wish to ask a question, you will need to press star N1 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 LJ Electronics Earnings Release Conference Call for the second quarter of 2022. With me are representatives of each business management division, Mr. Young Won Seo from Home Appliance and Air Solutions, Mr. Jung Il Lee from Home Entertainment, Mr. Ju Young Kim from Vehicle Component Solutions, Mr. Chung Hyun Park from Business Solutions. We are also joined by Mr. Sangho Park from Global Business Management Group, Mr. Hongsoo Lee from Accounting Division, and Mr. Jonghyun Park from Finance Division. Please note that all statements we will be making today regarding the 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 made today. Today, I will outline the overall performance results of the second quarter of 2022 and the outlook for the third quarter. After that, each division will take turns to deliver its business results and outlook. Now, let me start with the consolidated financial results of the second quarter of 2022 and the outlook for the third quarter. Consolidated sales of the second quarter was 19.5 trillion won, and operating profit was 792.2 billion won. Despite the decline in global TV demand, sales grew 15% year-on-year on the back of increased sales in premium appliances and revenue growth in vehicle component business with easing of OEM production disruptions. Though there was upward pressure on expense with rising raw material and logistics costs, We maintain solid profitability attributable to the turnaround in VS and top line growth in the appliance business. I will now briefly review the second quarter performance of each business. H&A recorded 8.1 trillion won in sales, 432.2 billion won in operating profit, and 5.4% in profitability. HE recorded 3.5 trillion won in sales, and 18.9 billion won in operating loss. VS recorded 2 trillion won in sales, 50 billion won in operating profit, and 2.5% in profitability. VS recorded 1.5 trillion won in sales, 14.3 billion won in operating profit, and 0.9% in profitability. Each business will later share its respective business results and outlook in detail. Let's move on to the profit and loss and cash flow of the second quarter. In terms of profit and loss, reflecting financial income and expense, equity method gain and loss, other non-operating income and expense, corporate income tax, and income and loss from discontinued operations, we posted $338.1 billion in net income. Next, on cash flow. Q2 cash flow from operating activities was $1.8 trillion, and cash flow from investment activities was negative 922.7 billion won, resulting in net cash flow of 984.8 billion won. When reflecting cash flow from financial activities of negative 121.3 billion won, cash balance at the end of Q2 came to stand at 6.5 trillion won, 863.5 billion won increase from the previous quarter. Next is the key financial position and indicators for the second quarter of 2022. As of the end of the second quarter, assets did at 55.4 trillion won, liability at 32.1 trillion won, and equity at 23.3 trillion won. In terms of leverage ratios, net debt to equity, liability to equity, and debt to equity all decreased quarter on quarter and year on year, and we continue to maintain a healthy financial condition. Next is the outlook for the third quarter. In terms of the business environment, uncertainties are expected to persist due to geopolitical risks stemming from the prolonged Russia-Ukraine conflict, worsening inflation, and declining consumer sentiment. Amidst this environment, we will actively address the polarized demand through improved product mix with focus on premium products and expansion of cost-competitive mass-tier products. We will drive profitable growth by enhancing sales in VS and boosting contents and advertisement revenue. We predict third quarter revenue to grow year on year on the back of solid sales of appliances and top line growth in vehicle components. We seek to secure profitability through efficient resource management and product mix improvement. We will move on to the second quarter results and third quarter outlook by business. But before that, I would like to state that upon closing the solar panel business at the end of June, Following our announcement on discontinuing operations last February, all related profit and loss have been reflected in income and loss from discontinued operations from the Q2 earnings release, in line with accounting guidelines on discontinued operations, and past performance results have also been restated. Now the business results and outlook starting with H&A. Let me share the second quarter results of H&A. We recorded sales of $8.1 trillion, of 18% year-on-year led by growth in overseas markets, notably North America. Though the revenue growth in overseas markets acted as an upside factor for profitability, operating profit decreased year-on-year due to rising raw material and logistics costs. Next is the outlook for the third quarter. With worsening inflation and waning consumption of consumer goods in the market, demand for home appliances is expected to slow. causing the competition among market players to further intensify. Amidst this environment, we seek to expand premium model sales and strengthen the competitiveness of our volume zone models to continuously scale the business. We will raise selling prices and reduce costs to secure profitability. I will share the second quarter results of HE sales declined year-on-year due to sluggish sales in major advanced markets impacted by the decrease in global TV demand. Despite improved material cost with panel price drops, operator profit decreased year-on-year due to declining revenue and increased marketing spending to address the intensifying competition. Now let me share the outlook for the third quarter. In the market, As concerns of a global recession continue to shrink market consumption, competition is projected to further intensify. Accordingly, we will enhance revenue by expanding sales of premium products such as OLED TVs and proactively capturing opportunities provided by the upcoming World Cup. We plan to secure profitability through efficient marketing spending. Let me share the second quarter results of VS. Sales grew year on year to stand at 2 trillion won thanks to proactive efforts to address additional demand from OEMs by effectively managing the supply chain. We moved into profit on a quarterly basis on the back of revenue growth and ongoing efforts to improve cost structure. Next, the outlook for the third quarter. While the automotive chip shortage is expected to gradually ease, Uncertainties in the external market stemming from inflationary pressures and geopolitical risks are expected to persist. So by strengthening cooperation with automotive OEMs and better managing the supply chain, we will actively respond to rising demand and we will continuously improve cost structure and minimize risk from uncertainties in the market to maintain top line growth and profitability. I will share the second quarter results of BS Q2 sales increased year-on-year, led by recovery in B2B demand and consequent top-line growth in information display, but sales decreased somewhat against the previous quarter due to slowing sales following the peak season for PCs in Q1. Despite that strong performance in ID, operating profit decreased year-on-year, impacted by the intensifying competition due to reduced IT demand and a hike in major components and logistics costs. Now let me share the outlook for the third quarter. IT demand is expected to decline, with concerns of a global recession and COVID entering the endemic phase. B2B demand is expected to rise, supported by the base effect from last year, though growth may slow compared to past projections. We will build on the sales growth momentum and continue to secure profitability by continuously identifying potential B2B projects in diverse verticals and gaining more project wins. That brings us to the end of the second quarter earnings release and outlook for the third quarter. We will now take questions. Operator, please commence with the Q&A session.

Now, Q&A session will begin. Please press star and 1 if you have any questions. Questions will be taken according to the order you have pressed the star and 1. For cancellation, please press star and 2 on your phone. The first question will be provided by Dongwon Kim from KB Securities. Please go ahead with your question.

Yes, thank you for the question. I have two questions about VS. First of all, I would like to ask for your detailed opinion on the performance of the medium-term performance of the VS business by dividing it into infotainment, LG Magna, and GKW. Next, I would like to ask if the recent power trend of LG Magna and GKW Thank you for taking my questions. I have two questions to be answered.