Lg Elec S/Gdr 144A

Good morning and good afternoon. Thank you for joining LG Electronics Earnings Release Conference Call for the fourth 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 LG Electronics Earnings Release Conference Call for the fourth quarter of 2022. With me are representatives of each business management division, Mr. Lee Kwon Kim from Home Appliance and Air Solutions, Mr. Junghee Lee from Home Entertainment, Mr. Juyeon Kim from Vehicle Component Solutions, Mr. Dongchul Lee from Business Solutions. We are also joined by Mr. Sang-ho Park from Global Business Management Group, Mr. Chung-hyun Park from Corporate Business Management Division, Mr. Hyung-jae Lee from Finance Division, and Mr. Hong-soo Lee from Accounting Division. Please note that all statements we'll be making today regarding the financial results of the fourth quarter are subject to change in accordance with the result of the external audit. 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 fourth quarter of 2022 and the outlook for the year 2023 and the first quarter. Then each division will take turns to deliver its business results and outlook. After that, I will share our ESG activities and achievements. Now let me start with the consolidated financial results of the fourth quarter of 2022 and the outlook for 2023 and the first quarter. Consolidated sales of the fourth quarter was $21.9 trillion won and operating profit was $69.3 billion won. Despite sluggish sales in home appliance and TV due to slow demand caused by inflationary pressures in major countries, Revenue grew year-on-year on the back of strong sales in vehicle components. H&A and VS remained profitable, but operating profit decreased by a large margin year-on-year due to rising marketing costs entailed by intensified competition in the appliance business as demand for durable goods became sluggish and increased promotion costs to secure sound inventory levels in TV and IT. I will now briefly review the fourth quarter performance of each business. H&A recorded $6.4 trillion won in sales, $23.6 billion won in operating profit, and 0.4% in profitability. H&E recorded $4.5 trillion won in sales, and $107.5 billion won in operating loss. VS recorded $2.4 trillion won in sales, $30.2 billion won in operating profit, and 1.3% in profitability. BS recorded 1.2 trillion won in sales and 77.8 billion won in operating loss. 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 fourth 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 212.4 billion won in net loss. Next, on cash flow. Q4 cash flow from operating activities was 472.2 billion won, and cash flow from investment activities was negative 1 trillion won, resulting in net cash flow of negative 1.1 trillion won. When reflecting cash flow from financial activities of negative 100 23.5 billion won, cash balance at the end of Q4 came to stand at 6.3 trillion won, a 1.2 trillion won decrease from the previous quarter. Next is the key financial position and indicators for the fourth quarter of 2022. As of the end of the fourth quarter, assets stood at 55.2 trillion won, liability at 32.7 trillion won, and equity at 22.5 trillion won. In terms of leverage ratios regarding liability to equity, debt to equity, and net debt to equity, we continue to maintain a healthy financial condition. Now, the outlook for the year 2023 and the first quarter. In terms of the business environment, impacted by the interest rate hike in many countries to suppress inflation and prolonged geopolitical risk in Europe, concerns of an economic downturn are on the rise, and weak demand stemming from declining consumer sentiment is expected to persist for the time being. As part of our business strategy to overcome this situation, we will respond to changes in market demand in an agile manner by launching innovative and differentiated new products and strategic models to target the volume zone. We plan to secure additional top-line growth in promising business areas such as contents and service platform and B2B businesses. In terms of operations, we will focus on profitability-centered risk management in the first half and actively respond to possible improvement in demand in the second half to maintain top line growth momentum on an annual basis for 2023 and also continue to enhance profitability. Our first quarter revenue is projected to decrease year on year, impacted by weak demand in appliances and TVs. That said, we expect stable profitability on the back of efforts to improve cost structure and reduce costs. Now let's move on to the fourth quarter results and outlook for 2023 and the first quarter by business.

We will start with H&A. Let me share the fourth quarter results of H&A.

We recorded sales of 6.4 trillion won, a slight decrease year-on-year, as revenue declined in Korea and overseas markets due to weakening demand for appliances caused by deteriorating macroeconomic conditions. Operating profit decreased year-on-year due to rising fixed cost burdens and marketing costs entailed by intense competition. Next is the outlook for 2023 and Q1. Concerns of an economic downturn are expected to continue to shrink demand for appliances and, subsequently, competition in the market is expected to intensify more than ever. Amid this environment, we will gain top-line growth momentum by proactively responding to shifts in market and consumption trends such as demand polarization. We will aim to secure profitability by improving manufacturing cost structure and reducing expenses including logistics costs. In Q1, we will secure revenue levels similar to that of the previous year by strengthening our presence in the premium segment and driving business in the volume zone. We plan to maintain solid profitability by optimizing spending including logistics costs and expenses to address competition.