Lg Elec S/Gdr 144A

Good afternoon.

My name is Sang Bo Shim from Investor Relations. Thank you for joining LD Electronics Earnings Release Conference Call for the first quarter of 2023. With me are representatives of each business management division, Mr. Lee Kwon Kim from Home Appliance and Air Solutions, Mr. Chung Hee Lee from Home Entertainment, Mr. Ju Young Kim from Vehicle Component Solutions, Mr. Dong Chol 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. Hyungkyu Lee from Finance Division and Mr. Hongsoo Lee from Accounting Division. Please note that all statements we will be making today regarding the financial results of the first 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 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 first quarter of 2023 and the outlook for the second 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 first quarter of 2023 and the outlook for the second quarter. Consolidated sales of the first quarter was 20.4 trillion won and operating profit was 1.5 trillion won. Q1 revenue decreased year-on-year due to slow global demand in TV and IT stemming from weakened consumer sentiment. However, we are successfully improving our business portfolio through qualitative growth on the back of significant expansion in B2B businesses such as vehicle components and system air conditioners and continued revenue increase from non-hardware business. Despite the impact from sluggish sales, stable profitability was recorded across all businesses thanks to enhanced operation efficiency secured through cost structure improvement and efficient spending and efforts to reduce expenses, including logistics costs. I will now briefly review the first quarter performance of each business. H&A recorded $8.1 trillion in sales, $1.1 trillion in operating profit, and 12.7% in profitability. AG recorded 3.4 trillion won in sales, 200.3 billion won in operating profit, and 6% in profitability. BS recorded 2.4 trillion won in sales, 54 billion won in operating profit, and 2.3% in profitability. BS recorded 1.5 trillion won in sales, 65.7 billion won in operating profit, and 4.4% 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 first 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 546.5 billion won in net income. on cash flow. Q1 cash flow from operating activities was 1.1 trillion won, and cash flow from investment activities was negative 1.6 trillion won, resulting in net cash flow of negative 409.4 billion won. When reflecting cash flow from financial activities of 898 billion won, cash balance at the end of Q1 came to stand at 6.8 trillion won, a 488.6 billion won increase from the previous quarter. Next is the key financial position and indicators for the first quarter of 2023. As of the end of the first quarter, assets did at 57.5 trillion won, liability at 34.1 trillion won, and equity at 23.4 trillion won. In terms of leverage ratios, regarding liability to equity, debt to equity, and net debt to equity, we are maintaining a healthy financial condition. Now the outlook for the second quarter. In terms of the business environment, uncertainties are mounting in the market triggered by geopolitical risks such as the U.S.-Chinese relations and Russia-Ukraine conflict, concerns of an economic downturn due to continued interest rate hikes, and instability of the financial system prompted by monetary tightening. We will accelerate the transition to a business structure for sustainable growth by diversifying our business portfolio and create sound profitability through preemptive risk management and efficient spending. We expect to grow the top line year-on-year in Q2 by actively responding to air conditioner demand in the peak season and securing steep growth in vehicle component sales. We expect operating profit to increase year-on-year on the back of revenue growth and stable profitability across all businesses. Now let's move on to the first quarter results and second quarter outlook by business. We will start with H&A. Let me share the first quarter results of H&A. Revenue recorded a slight growth year-on-year as we applied differentiated distribution strategies and expanded the B2B business despite weakening demand for appliances caused by deteriorating economic conditions. Operating profit increased significantly year-on-year despite increased marketing spending entailed to address competition in the market on the back of reduced expenses, including logistics costs, together with active efforts to improve the cost structure. Next is the outlook for Q2. Demand for appliances is expected to decline as consumption continues to shrink due to concerns of an economic downturn. subsequently leading to further intensified competition in the market. Amid this environment, we will continue to achieve top-line growth in B2B with eco-friendly, energy-efficient air solutions and proactively respond to shifts in demand by launching price-competitive strategic models in the volume zone to maintain our position in the market. We plan to secure stable profitability through stringent cost measures such as obtaining stable raw material prices and reducing fixed costs, and enhanced efficiency in spending, including marketing expenses.

I will share the first quarter results of HE.

Sales declined year-on-year, impacted by reduced TV demand in Europe due to the protracted Russia-Ukraine conflict and sluggish consumption brought on by elevated uncertainties in the global economy. Despite the impact from sluggish revenue, we recorded sound profitability turning around to be in the black with a significant growth from the previous quarter and a slight increase year-on-year through efficient supply of raw materials and enhanced efficiency in spending, including marketing expense. Now let me share the outlook for the second quarter. In the market, recovery of TV demand is delayed due to concerns of a global economic slowdown. Competition in the premium product segment is projected to get fiercer, and there are also concerns of a possible cost increase regarding LCD TV panel prices. Accordingly, we will secure growth momentum by strengthening competitiveness in mass-tier TVs as well as launching the new OLED EVO and driving webOS platform business. We seek to maintain solid profitability through accurate demand forecasting and better production operations, stable raw material prices, and efficient cost spending. Let me share the first quarter results of FIAS. Sales grew by a large margin year-on-year thanks to increased sales volumes from high-order backlogs and stable supply chain management for key components, including automotive semiconductors. Operating profit continued to be positive, improving both year-on-year and quarter-on-quarter on the back of revenue growth from new projects and enhanced efficiency in business operations. Next, the outlook for the second quarter. Uncertainties regarding demand for vehicle components continue to exist in the market, with concerns being raised over demand in the global auto market as consumer sentiment is contracted. However, the transition to electric vehicles is increasing steadily. We will maintain high top-line growth by securing new orders and managing the supply chain. We will seek to improve profitability based on product mix improvement and operating leverage effects. I will share the first quarter results of BS. Sales decreased year-on-year impacted by dampened demand in the global IT market but increased quarter-on-quarter on the back of Q1 peak season effects and increased sales in B2B business including hotel TVs. Operating profit decreased year-on-year due to the drop in revenue but turned around to be in the black quarter-on-quarter through expanded sales of grand PCs in the peak season and active efforts to enhance spending efficiency. Now let me share the outlook for the second quarter. IT demand is expected to continue on a downward path up to the first half of the year, though there are expectations of a slight pickup from the second half. Information display is projected to maintain a growing trend, though the pace of growth may be somewhat slower. We will strengthen our product lineup by launching differentiated products such as Gram Ultra Slim, secure growth momentum in ID business by identifying potential demand in diverse verticals, and drive new businesses such as EV charging solutions. We will continue to secure profitability by optimizing spending. Last but not least, let me share our ESG activities and achievements. We are actively seeking to grow eco-friendly business as we pursue revenue growth through energy efficient, eco-friendly products such as heat pumps and ESS. We are reducing carbon emissions in the use stage of major products by developing innovative technologies that help enhance energy efficiency and launching products that adopt these technologies. In recognition of our efforts, LG Electronics has been named 2023 Energy Star Partner of the Year Sustained Excellence by the U.S. EPA and DOE this year. This is the tenth time that LG Electronics has been named Partner of the Year since 2012. and represents the level of recognition we are receiving from external partners for our achievements as we lead efforts to address global climate change. Moreover, we seek to protect the marine ecosystem and address the climate crisis through new upgrade features via our upgradable appliances. The microplastic care option first released in washing machines in early February reduces emission of microplastics that are 20 micrometers or bigger by 70% compared to standard options, and the energy saver option on dishwashers is expected to reduce energy consumption by 20% compared to standard options. We are also pursuing a circular economy by expanding the use of recycled materials in major products. Recycled materials are already applied to many of our products such as refrigerator, styler, dishwasher, and Tune Mini. We aim to expand the scope to styler, shoe case, and shoe care, and OLED TV this year and use a total of 600,000 tons of recycled plastic by 2030. We will continue to provide innovative customer experiences by offering products and technology aligned to ESG values and turn these into business opportunities as we lead ESG efforts to build a better life for all. That brings us to the end of the first quarter earnings release and outlook for the second quarter. We will now take questions. Operator, please commence with the Q&A session.

The first question will be presented by Kangho Park from Daesin Securities.

Thank you for the question. Also, congratulations on your good performance in the difficult environment. I will ask two questions. The first is about H&A, and the second is about the military side. H&A's sales rate in the first quarter was 12.7%, which is quite a good performance. In the second quarter and the second half, there seems to be a lot of inconsistencies in terms of demand. I would like to ask you to comment on whether it is possible to maintain high profitability even in the second half of the year due to the cost improvement and the reduction in costs that took place in the first quarter. Secondly, LG Electronics' legendary sales volume has always shown a pattern of rising and falling. In the second half of this year, if the game recovers and the performance improvement continues,

Thank you. First of all, I would like to congratulate LG Electronics for delivering solid numbers for your business performance despite this difficult business environment. I have two questions, one for H&A business and the other for corporate-wide operations. First for H&A, your first quarter operating income recorded 12.7% and it's a very impressive number. However, when it comes to the second quarter and due to the second half, there still are a lot of uncertainties in the market demand and the market prospect looks quite murky. In the first quarter, you benefited from improvement in cost structure including Logistics cost and raw material prices. Do you believe that you'll be able to keep benefiting from this impact in the second half? Will you be able to maintain this high profitability into the second half? My second question regards the corporate wide operation. Historically, LGE showed this typical seasonality of having high numbers in the first half and low in the second half. In the second half, do you think you'll be able to break out of this trend and have a secure high annual profit based on the prospects of the recovery in the economy and continuous improvement of your business?

HNA 먼저 답변 드리겠습니다. As you said, the first quarter has achieved two-digit sales profits with the greatest performance in history. However, if you look at the market situation, like the first quarter, the uncertainty is expanding due to the financial market instability of major countries such as the U.S. and the deterioration of consumer psychology, and it is expected that the competition between companies will continue to be fierce.

Let me answer your question on H&A business first. It's true that we have posted double-digit numbers, and this is record high numbers for our business. Uncertainties in the market brought on by financial instabilities in the U.S. and major countries and undermined consumer confidence are projected to persist into the second half, however, and beyond. and accordingly competition is expected to continue to intensify.

We aim to maintain growth momentum and secure stable profitability

by preemptively and flexibly responding to demand changes by region and segment.

First of all, with the product strategy of the company, not only the premium segment that has already obtained a strong image, but also the volume-saving demand that is newly formed according to the introduction of income double-layer, regionally, by actively responding to the volume-saving demand, For product strategies, we will respond proactively not only to the premium segment, which is our stronghold, but also the newly formed volume zone driven by income polarization.

will increase sales and expand B2B in the Korean market, which made a turnaround in terms of growth, while keeping our eyes on Europe and other markets that have the potential of demand recovery.

I will look to the one car, which will actually meet will you be marketing Bionto Amman? You want to pay my whole song? It doesn't. It's on. It's on. It's on. It's on. It's on. It's on. It's on.

At the same time, we will innovate cost structure and enhance efficiency in logistics cost, marketing expenditure, and others to make substantial improvement year over year and maintain stable level of profitability.

Let me answer your second question on corporate wide operation. As mentioned before, difficulties in business environment are projected to be sustained into 2023 as interest rates are kept high

Increasing the possibility of economic recession and geopolitical risks continue in major markets.

In terms of the business environment, there are positive factors such as the increase in raw materials prices and the reduction in the burden of logistics costs, and the increase in the scale of sales of automobiles. However, there is also a risk factor such as the continued decline in demand and the increase in competition, as well as an increase in marketing costs.

There are some positive factors for our business. For example, less pressure on raw material and logistics costs, and an increase in operating profit of vehicle component business. On the other hand, risks do exist as demand continues to dwindle, subsequently intensifying competition and putting pressure on marketing costs.

In this environment, in the first half of the year, Against this backdrop, in the first half, LG Electronics will focus on risk management based on profitability amidst the drop in consumer demand

and prepare for the possible improvement of demand in the second half by strengthening our business fundamentals. This will enable us to maintain annual growth momentum and secure solid profitability.

The profitability of the company is due to the characteristics of the sales products, such as the air conditioning business, and the year-end maturity, and the focus on promotions. For our profitability,

We did tend to show seasonality of high in the first half and low in the second because of the characteristics of our products, including AC, and as promotions are concentrated on end-of-the-year peak seasons. But in recent years, we have successfully improved business structure to offset the effect from this trend by growing B2B business, enhancing regional portfolio, and promoting online sales. We will continue to exert our best to stabilize quarterly profitability by improving inventory management based on accurate demand forecast and expanding sales and footprint of B2B products.

The next question will be presented by Dongwon Kim from KB Securities.

First of all, due to the entry of the competition in the OLED TV market, there seems to be a concern about the possibility of reducing LG Electronics' occupancy rate and the increase in marketing costs due to competition. I would like to ask for your opinion on LG Electronics' large-scale strategy for this. Next, I would like to ask if it is possible to talk about the current supply and demand status of Vs current supply and demand status and the target of supply and demand status for each product by this year.

Thanks for taking my question. I have two questions on HE and VS. First, on HE, with competitors joining the OLED TV market, concerns arise that LG Electronics' market presence could weaken, like MS drops, and its marketing spend could increase against competitors undermining profitability. What is your strategy to respond to that potential? My second question is turning to VS. Can you give us an update on your current backlog and the proportions of each main business? Can you also share your targeted backlog for the V.S. division in each of the main businesses as of the end of 2023, if possible?

Yes, I will answer H first. Overall, the demand for TV market has already come out compared to the level before COVID-19. As a result, the original TV market growth Let me address the first one on HE.

OLED TV's growth is likely to be limited due to TV demand slowdowns compared to pre-COVID levels, and our MS could fall due to competitors' entries into the OLED business. But, we expect their entry help expand the market scale as a whole, and thus we're confident in our No.1 leadership as an OLED pioneer.

Ye Dangsanun Operation 영향 개선을 기본으로

Our profit protection strategy is to diversify business portfolio by expanding our business areas into platform and becoming the number one brands in premium TVs with our OLED line at the center on the back of our operational capabilities improvements.

First of all, in terms of operation, we want to acquire a strong profitability through the average price increase and continuous price reduction through the expansion of premium products, and we want to improve the profitability by considering regional competitiveness and market prospects, especially by maintaining the right stock and improving profitability through the efficiency of cost input.

On the operations side, we will secure a sound level of profitability through ASP increases and cost savings driven by premium product expansion. Considering our regional competitiveness and market outlook, we will improve our ASP and product mix, maintain appropriate levels of inventory, and further the efficiency of cost inputs in order to improve profitability.

With regards to the diversification of our business portfolio, we will have more competitive content and services while providing an unrivaled experience with WebOS so that we drive toward a highly profitable platform business

and address flowing demand within hardware.

Yes, I will answer the VS department. Bangsa currently has more than 80 trillion won of water-cooled storage, and the proportion of products in water-cooled storage is about 60% of the size of the import product, 20% of the size of the electric vehicle, and 10% of the size of the vehicle lamp.

To the second part of your question on VES, we currently have a backlog of over 80 trillion won. In terms of each business's shares of the total backlog, infotainment takes up a percentage in the mid-60s, EV component around 20%, and automotive lamp in the mid-teens range.

In 2023, we plan to continue the growth rate for the year-on-year through continuous new stock expansion, We are to continue growth momentum year over year with more order intakes going into 2023.

On each business's shares, we expect the EV component business to continue to take up a larger share in the future based on the high growth within the EV markets and the synergies with the JV-LG Magna EPT. Thank you.

The next question will be presented by Jung Joon Park from JP Morgan. Yes, first of all, congratulations on your good performance.

In my opinion, it seems to be the most profitable company among Korean and Thai companies in the first quarter. There are two questions. First, there was a recent recession on the VS side, Elec S & Gdr 144A Elec S & Gdr 144A Elec S & Gdr 144A First of all, congrats on a good quarter.

In the first quarter, your profits actually increased. My first question is on VES. The demand within the automotive market is expected to be sluggish in a tighter consumer spending environment and recession. Do you expect there to be an impact on VS Division's long-term revenue guidance?

My second question regards H&A business. Recent collapse of U.S. banks and high interest rates are likely to undermine consumer confidence. I am aware of the fact that LGE is focusing on high-end segment. but are you making any changes in demand forecast for home appliance against this unfavorable environment?

I will start with the first part on VES.

We are aware of the concerns over the vehicle component and automotive demand declines led by recent increases in interest rates and subsequent worries over economic slowdowns.

However, in the case of some demand deterioration, it is expected that major OEM companies will promote demand growth through increasing incentives, and in fact, there are no major changes in the market research institutions' outlook and customer production plans.

However, some major OEMs are expected to drive demand with incentive expansions, and we don't see any seismic change in market research firms' recent forecasts or our customers' production plans.

In addition, the shortage of semiconductors, which are still facing some difficulties in terms of parts supply, has been expected to increase significantly since 2014, when the production facilities of a large number of foundry companies will be completed. On parts supply, some continued headwinds of the chip shortages are likely to get resolved pretty much from 2024

when a number of foundries complete their construction of production facilities, bringing OEMs' productivity and cost competitiveness to the upside. So, in the mid to long term, our revenues are likely to stay in previous outlook ranges, showing mid-10 level CAGRs since we can expect rising EV-related demand, along with accelerating trends toward XEV. Thank you.

HNA Elec S & Gdr 144A Elec S & Gdr 144A Let me answer your question on H&A business.

Russia-Ukraine war, slowdown of global economy, high inflation, and other unfavorable factors continue. Market demand for refrigerators and washing machines dropped by 3.4% in 2022, and in the fourth quarter of the year, we saw a whopping 10.3% decrease in demand, and this trend continues. Moreover, consumer confidence is further eroded as financial instability in the U.S. deepens, all of which points to one conclusion. It will be difficult to expect demand recovery for a while. Some do expect demand to rebound starting from the second half. However, it will take time before people really see an improvement in their disposable income. Even though things may get better in the second half, the speed of recovery will be gradual.

As a result of the changes in demand related to the party's business, Elec S & Gdr 144A

Another change that influences our business is demand polarization. Premium segment continues to show healthy level of demand. On the other hand, mid-income consumers who are experiencing a drop in their disposable income are now showing a different pattern of consumption from the past. They now tend to scale down, focusing more on key features of products, and this is leading to a formation of a volume zone.

Elec S & Gdr 144A Elec S & Gdr 144A

In order to get market leadership despite these unfavorable circumstances, we'll tap into mass tier and ODM models to attract the volume zone segment and keep our competitive edge. At the same time, we will continue to strengthen our position in the premium segment where prices tend to be rigid, so that we can deliver on our strategies of securing stable production volume and protecting profits.

The next question will be presented by Sung Kyu Kim from Daiwa.

Hello. Congratulations on your success. Thank you for the opportunity to ask a question. I also have two questions. One is on the warrior side, and the other is on the H side. First of all, I would like to ask about the growth power of the warrior. It may also have something to do with the performance pattern of the above. In fact, after the withdrawal of the smartphone business, I think that the growth power of the LG Electronics is a little less. Elec S & Gdr 144A Elec S & Gdr 144A First of all, congratulations on your performance for this quarter

and thank you for the opportunity. I have two questions, one for the corporate wide operation and the other for HE business. First, corporate wide operation. My first question regards the growth engine for the overall business of LG Electronics. And this may be linked with your typical profitability pattern of high in the first half and low in the second half. Ever since you have withdrawn from the smartphone business, there are some concerns over your business that this move might have weakened your growth engine for the future. Regarding this, can you share with us your current investment in future technologies and direction for new business?

My next question is on the outlook of and current status of your channel inventory. It's my understanding that you proactively adjusted your channel inventory and your channel inventory got back on track at the end of 2022. So can you please share the current status of and the outlook on your sellouts? Can you also share the current status of in-house inventory levels like panel, and Finished Products and also Tenor Inventory. Thank you.

First, I would like to start by answering the previous questions. In order to strengthen the momentum of business growth, our company is securing the full potential of the existing main business. Secondly, we are building a future-oriented business portfolio by advancing into a new business area with great potential for growth. Let me answer your question regarding corporate wide operation. To strengthen our growth momentum, first, we are securing the full potential of existing business.

We are entering new business areas with significant growth potential to build future-oriented business portfolio. At the same time, we are not only investing in developing future-oriented in-house-grown technologies, but also actively preparing for future through inorganic measures such as M&A and joint venture.

Let me talk about what we are doing in order to secure the full potential of our traditional main business.

First, for H&A business, we are expanding sales in B2B, such as system air conditioners, built-in, and rental, and adopting new business models related to smart appliances, such as DINQ and upgradable appliance.

And in terms of TV business, we are expanding the web OS platform to expand the web OS smart TV ecosystem. For TV business, we aim to deploy webOS platform further to grow the ecosystem.

And our goal, based on the platform, is to widen our business portfolio to advertisement and content to secure growth momentum.

In addition, in the electric vehicle business, which is the key growth power of the company, we actively utilize the key technology base of the company's different electrical, electronic, and communication fields, and use that technology to continuously release innovative high-quality new products such as digital cockpit, AI technology connection, smart lamp, and IPGM e-powertrain, which are synchronized with the driving parts.

Our vehicle solution, which is our key growth engine, tapping into the accelerated market shift toward EV and our differentiated key technologies in electricity, electronics, and communication, we will continue to introduce innovative and high-value-added products to the market, such as large-screen digital cockpit, AI-connected smart lamp, and IPGN e-powertrain with integrated driving parts. We can widen our customer bases to strengthen our foothold in the market.

And lastly, in the field of new businesses, we are actively developing business technologies and products for growth potential such as robots, electric vehicles, and charging solutions.

Last but not least, for new business, our activities in technology and product development in high potential areas like robots and EV charging solutions are now in full swing, and we continue in our search for new business opportunities.

Next, I will answer the questions from the HEE headquarters. In the first half of the 23rd year, the sale-out volume is expected to be a new trend compared to the previous year due to the decline in market demand. However, the party is coordinating the sale-out and production volume adjustment, which is closely linked to the demand outlook of each distribution channel, in accordance with these demand changes. Through this, we will be able to maintain a healthy distribution structure in the first half of the year

Let me run it down for the HE item. Although the total sellouts are expected to fall year-over-year in the front half of this year due to downward demand trends, we have hedged ourselves against this inevitability by aligning sellouts, sell-ins that are closely associated with channels' demand outlook and total production volumes. and we expect to maintain a sound level of channel inventory and improve WOS year over year. Per product segment, OLED channel inventories have improved YOI and WOS similar to that of last year in the first half. And in UHD and FHD, both channel inventory and WOS are expected to improve YOI in the front half of 2023.

In each region, Korea and the U.S. are under the influence of the demand-dynamic competition, which is causing small-scale deterioration compared to the previous year.

For region, tenant inventory and WOS are likely to worsen slightly YOI in Korea and the US due to demand declines and fierce competition on which we are going to work more closely in the first half. But the figures are to improve YOI in Europe and the CIS region. Thank you.

The next question will be presented by Hyungwoo Park from SK Securities. Hello, I'm Hyungwoo Park from SK Securities.

I have two questions for you. First, I'd like to ask you about the strategy of the H-business department's app OS. You answered the OLED question briefly earlier, but when I recently searched the articles on LG, I saw that the media reports related to the app OS have been very frequent recently. I'd like to ask if WebOS platform business really has a real contribution to us. And I'd like to ask if you're looking forward to a good chance of growth. Second, I'd like to ask you about the demand for the VES business department. LG Electronics has always emphasized the car parts business, but the other electric parts companies that I communicate with in Korea, in fact, if you look at it recently, the demand for electric parts this year is lower than expected. Hello, everyone. This is Park Kyungwoo from SK. I have two questions. First, my first question is on HE Division's strategy. It's especially about OLED.

When I look up LG Electronics, we can often find many articles about OS. How much does the webOS-based platform business contribute to your earnings? Does that actually contribute to your earnings? And are you also optimistic about the growth potential of the business? My second question is on VS Division's demand. LG Electronics has put its vehicle component business in the forefront while other automotive parts suppliers expected EV parts demand to hover below market expectations earlier this year. Sometimes they said it's a bit disappointing. What drives the gap? That's it. Thank you.

Yes, I will answer H's question. As content supply including OTT services is diluted and various applications and services are added, Let me take the first part on HE. With the rise in content supplies like OTT services combined with various applications and services, the value of smart TVs has risen as a media platform that provides customers with lots of things to see

and enjoy based on a TV-optimized OS. Within this environment, we have established platform ecosystem where we have a competitive edge with 190 million users data in addition to our unrivaled UI and media play performance and reliable and scalable webOS platform. and that has brought together various partners and developers. By aligning with WebOS Smart TV users, we have further detailed new business models that link with various content, services, and targeted us.

The platform business of the company has recorded a sales growth of more than twice as much in two consecutive years due to the pandemic, and in the first quarter of 2023,

Our platform business has posted more than double the revenue growth year-over-year for two consecutive years despite the pandemic. And as of Q1 this year, its growth rate stood at over 40% year-over-year.

. . . . . . .

To broaden the ecosystem of our platform business, we have sold our webOS smart TV platform to multiple regional TV makers, partnering with more than 200 companies as of Q1 2023. Going forward, we will focus our business capabilities and strategies on continuing to create more business value in content services and targeted ads based on the device expansions. Thank you.

Let me answer your question on VS. First of all, as to the demand outlook, it's likely to differ based on respective product portfolios and prediction metrics. Regarding our VS division though, when compared to other automotive parts suppliers, our business portfolio is in good health, which is comprised of EV-related products and connected car components

where the market is presently expanding. In these business areas, we have sought to expand our order intakes and fortify our market presence versus other automotive parts suppliers. Just to echo, we have provided high-value added products with advanced, frequently used, and optimized UI for our OEMs, based on our many years of B2C experience trying to better understand our end customers in addition to our competitive technologies in electrics, electronics, and telecommunications. Thank you.

The next question will be presented by Simon Wu from Bank of America. Thank you for your question. The first question is,

I'd like to ask you a question about the electric car market. The stock market is at 80% and the sales growth is very good. However, the profit margin of the business has been stopped at 1-2% recently. What is the reason for that? Please share your strategy to see how you can achieve a profit margin of about a single digit. Thanks for taking my questions.

My first question is on vehicle component solution. Your backlog is now posting about 80 trillion won, and your top line growth seems pretty good. However, your operating profit seems to be stagnant at 1% to 2%. What's the reason? Can you also walk us through your strategy to achieve mid-single digits of operating profits?

And my second question regards H&A business. You have mentioned several times in the past that your rental business, including water purifier, is quite significant in its size. Could you share with us your current sales status and annual target for the business, and how is your business doing in overseas market?

Yes, I will answer the VS headquarters. First of all, I would like to talk about the visibility of the VC business. We expect that the company will be able to continue to maintain and continue to improve its profitability after the previous year. However, I think you are a little worried about the low current business profit rate. This is due to the recent price increase in semiconductor prices and the cost of operation for the replacement of the water supply. Elec S & Gdr 144A

Let me address the first one on VS. First of all, in regards to the outlook on VS Division's profitability, we expect to continue seeing flow through in our profitability gradually, getting us into the positive following last year. I think you now have some concerns over our operating profits. Recently, cheap prices have risen and operational prep costs have also risen to address new projects. Therefore, the profit increasing rate has been a bit slow relative to the growth rate of our top line. However, we are now discussing sharing cost burdens on a positive note with our OEMs, our customers, based on our strong relations with them. In addition, we are going to improve that further because we expect greater tailwinds in terms of our product and project mix improvements and top-line growth. We will further raise it this year by improving cost structures more proactively across our operations, like improving SCM and production efficiency, along with volume ramp-ups.

H&A's rental business is growing by at least 10% this year. Elec S & Gdr 144A Let me answer your questions regarding AT&A's rental business. Last year, rental business recorded $860 billion in revenue.

and we expect our rental business to grow by about 10% year over year for this year. Growth in domestic rental market as a whole is actually slowing down. However, we have confirmed the possibility of renting out large appliances and based on our differentiated product and service competitiveness, we will secure growth momentum by expanding categories that have high entry barrier. for example, large appliances that can be taken apart and collected for cleaning.

In addition, the overseas rental business that has been postponed during the pandemic period, focusing on the Malaysian water rental business, has also been actively implemented. Since the first half of last year, it has been involved in the maintenance of the infrastructure, and in the second half, it has been involved in the implementation of the self-management model applied for the first time by the industry

We are resuming overseas rental business, which has been on hold during the pandemic, focusing on the Malaysian market. We started to look into infrastructure in the first half of last year, and in the second half, laid the foundation for robust business by introducing self-care model and financial leads.

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Better customer experience and a drop in monthly rental fee has led us to post continuous growth trend since the second half of last year. Since we are still at the early stage of the business, in order to focus on identifying scalable business model, we plan to expand rental service in succession from water purifiers to air purifier, styler, air conditioner, then vacuum cleaner by the end of this year.

In mid to long run, based on the success we build in the Malaysian market, we will strategically consider expanding our operation to other countries.

Our next question will be presented by Goh Eui-young from Hi-Investment and Securities. Hello, I am Goh Eui-young from Hi-Investment and Securities.

I have two questions. First, you mentioned a good volume in the home market. How much of this is contributing to the market share? Second, you mentioned a new robot or UV charger. I have two questions, one for H&A and the other for business solution. First, for H&A business, you have been mentioning about the importance of volume zone.

and is your strategy of expanding volume zone translating into improvement in actual numbers, for example, market share? And my second question, the new business area includes robot and EV chargers for business solution division. Please share with us the current progress and meet the long-term growth plan for this new business category.

Let me answer your question on the HNA business.

The volume zone strategy, which we adopted in the second half of last year, is now delivering tangible results in the business. For example, with the introduction of new strategic models in this year, the company recorded a double-digit growth in revenue and profitability.

The reason why the company was able to achieve a relatively fair level of sales even in the overall global demand reduction trend We were able to achieve a healthy level of sales compared to the competition despite global demand crunch, mainly because B2B products, including System AC, posted high growth

and our strategy to focus on the volume zone has been proving to be effective.

Global market demand is expected to continue to be uncertain and the demand will be diversified. We will continue to strengthen the volume zone target model and product roadmap management, including the supply model and ODM products we have made in the future, and we will further review the local supply capacity enhancement to expand the volume zone business.

As income polarization and uncertainties in global demand are projected to continue, we will strengthen product roadmap for volume zone, including in-house manufactured master models and ODM products, and consider ways to strengthen local supply to lay the foundation for our volume zone business. Thank you.

Yes, I will answer the question. You asked two questions about robots and electric car charging. First of all, I would like to talk about the robot business. In the commercial robot market, we are promoting business development centered on delivery and logistics robots based on indoor autonomous driving technology and multi-robot operation technology. In particular, Serving Robot is a business cooperation with major domestic telecommunications companies Let me answer your questions regarding business solutions, robots and EV chargers. First, robot business.

technologies and capabilities on indoor autonomous driving and multi-robot operations, we are pursuing business in delivery and logistics in the commercial robot market. For serving robots, we are working with a major telco company in Korea, and we are looking forward to seeing meaningful increase in market share for this year. For logistics, we are having discussions with not only major logistics centers in Korea, but also with diverse global players.

And in the medium term regarding robots, we want to use the food and beverage areas created by the market as a volume zone first, and secure the business capacity as an automated solution provider of delivery and logistics robots through the international market policy of the logistics area. In order to do this, we are working with various companies In mid to long term, we would like to tap into the already established food and beverage segment as our volume zone, and by making inroads into overseas logistics markets,

We aim to secure capabilities as a solution provider for automation of delivery and logistics robots. To do so, we will strengthen partnership with diverse industries and come up with a solution business model by expanding technologies related to robots and creating synergy with sister companies.

Next, I would like to talk about the electric car charging project. Next is EV Chargers. Since the acquisition of Apple Mango, a development and production site has been set up in Pyeongtaek Digital Park

and we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter.

In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and quick chargers to the domestic market in the second quarter. In the second quarter, we are preparing to introduce slow and We are also preparing to complete product lineup to enter the U.S. and global markets in the mid to long run.

Rather than being a simple provider of charging devices, our ultimate goal is to grow as a solution provider who can provide differentiated solutions that cover hardware, software, and service, and identify diverse services based on the partnership with charging operators. Thank you. That brings us to the end of LG Electronics earnings release conference call for the first quarter of 2023. For further questions, please contact the IR team. Thank you.