Lg Elec S/Gdr 144A

Good afternoon. My name is Sangbo Shim from Investor Relations. Thank you for joining Elda Electronics Earnings Release Conference Call for the second quarter of 2023. With me are representatives of each business management division, Mr. Lee Kwon Kim from Home Appliance and Air Solutions, Mr. Jung Il Lee from Home Entertainment, Mr. Joo Young Kim from Vehicle Component Solutions, Mr. Dongcheol Lee from Business Solutions. We are also joined by Mr. Sangho Park from Global Business Management Group, Mr. Chung Hyun-bak from Corporate Business Management Division, Mr. Hyung-gyu Lee from Finance Division, and Mr. Hong-soo Lee from Accounting 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 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 second quarter of 2023 and the outlook for the third 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 second quarter of 2023 and the outlook for the third quarter. Consolidated sales of the second quarter was 20 trillion won, and operating profit was $741.9 billion won. Q2 revenue turned around to record growth year-on-year on the back of expanded sales in vehicle components despite the negative impact from delayed recovery in appliance and TV demand stemming from concerns of a global economic slowdown. Though we continue to see the effects from stabilized logistics and raw material costs and TV profitability significantly improved year-on-year, consolidated operating profit decreased slightly year-on-year due to the additional one-off provision regarding GM-Balt EV recalls. As was disclosed through the earnings released today, the decision was made to additionally reflect a one-time provision for increased material costs entailed during the GM-Balt EV recall period, and we reflected $151.1 billion, 50% of the amount in Q2, in line with the agreed share ratio with LG Energy Solutions. I will now briefly review the second quarter performance of each business. H&A recorded 8 trillion won in sales, 600.1 billion won in operating profit, and 7.5% in profitability. HG recorded 3.1 trillion won in sales, 123.6 billion won in operating profit, and 3.9% in profitability. VS recorded 2.7 trillion won in sales and 61.2 billion won in operating loss. VS recorded 1.3 trillion won in sales, 2.6 billion won in operating profit, and 0.2% 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 307.8 billion won in net income. Next on cash flow. Q2 cash flow from operating activities was 1.6 trillion won, and cash flow from investment activities was negative 1.4 trillion won. resulting in net cash flow of 160.1 billion won. When reflecting cash flow from financial activities of 267.6 billion won, cash balance at the end of Q2 came to stand at 7.2 trillion won, a 427.7 billion won increase from the previous quarter. Next is the key financial position and indicators for the second quarter of 2023. As of the end of the second quarter, assets stood at 58.2 trillion won, liability at $34.6 trillion won and equity at $23.6 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, though consumer sentiment is improving with easing inflation and there are expectations of a soft landing for the global economy, uncertainties continue to exist in the market due to continued monetary tightening measures of major countries and protracted geopolitical risks. We will secure business opportunities by preemptively responding to changes in the market and the competitive landscape and continue to improve our cost structure by making efforts to strengthen our business fundamentals. In terms of Q3 revenue, we will continue to drive growth year on year based on stable growth of vehicle component business and timely response to the TV peak season. We expect operating profit to increase year-on-year on the back of profitability-based business operations including cost structure improvements and efficient spending. Now let's move on to the second quarter results and third quarter outlook by business. We will start with H&A. Let me share the second quarter results of H&A. Revenue recorded a slight decrease year-on-year as weakened global demand for appliances and fierce competition persisted in the market, and the steep growth in B2B sales was somewhat subdued. Operating profit grew year-on-year, despite increased marketing spending to address new product launches and competition in the market, thanks to continuous cost structure improvements, including stable material and logistics costs. Next is the outlook for Q3. The market situation is expected to remain challenging for the time being, as demand is expected to decline, subsequently leading to further intensified competition in the market, and retailers aim to reduce inventory. Amid this environment, we will seek to minimize the impact on revenue by reinforcing our new product lineup and expanding coverage of mass-tier products and by conducting preemptive marketing activities. We plan to secure continued improvement to profitability through stable raw material prices and additional savings in ocean freight charges in the second half. I will share the second quarter results of HE. Sales declined year-on-year. impacted by intensified competition not only in advanced markets but also in growth markets amidst delayed recovery of demand for TVs globally. Despite the impact from sluggish revenue, we recorded profitability growth year-on-year on the back of lower panel prices compared to the previous year and enhanced efficiency in spending, including marketing costs. Let me share the outlook for the third quarter. In the market, though there are some expectations of a pickup in demand, economic uncertainties persist. And along with fiercer competition in the premium product segment, there are concerns of elevated cost burdens due to LCD TV panel price hikes. Accordingly, we will enhance our sales competitiveness for the peak season by strengthening our premium product lineup and launching mass-tier webOS Smart TV. We will preemptively manage risk with sound inventory operations through close corporations with retailers. Moreover, we will continue to improve our profit structure by expanding revenue from webOS platform-based contents and advertisements. Let me share the second quarter results of VS. Sales grew by a large margin year on year thanks to increased production by OEMs with the easing of the automotive semiconductor shortage and stable supply chain management for key components, including semiconductors. Though we recorded operating loss in Q2 due to the one-off provision for GM Bolt EV recalls, apart from the impact from the provision, operating profit continued to be positive, improving both year-on-year and quarter-on-quarter on the back of revenue growth and continuous improvements to our cost structure. Next, the outlook for the third quarter. Uncertainties regarding demand for vehicle components continue to exist in the market, though the automotive chip shortage is easing. However, the transition to electric vehicles is expected to increase steadily. We will maintain top line growth momentum through more new orders based on our product competitiveness and stable supply chain management. We will secure sound profitability with continuous efforts to improve our cost structure. I will share the second quarter results of BS. Sales decreased year-on-year, impacted by a much delayed recovery in global IT demand and slowing demand growth for information display business. Operating profit decreased year-on-year and quarter-on-quarter due to the drop in revenue and increase in marketing cost to address competition in the market. Now let me share the outlook for the third quarter. IT demand continued on a downward path up to the first half of the year amid concerns of a global economic slowdown, but is expected to pick up from the second half. Information display market is projected to maintain a growing trend, though the pace of growth may be slow for the time being. We will secure opportunities for top-line growth by expanding sales of strategic products in PC and monitor and enhancing capabilities to offer differentiated solutions by vertical in information display. We seek to secure profitability with enhanced model mix and cost structure improvements, including material and marketing cost reductions. Last but not least, let me share our ESG activities and achievements. We have established and are driving ESG strategies that can positively impact both the planet and people, and our products and services are delivering sustainable future value to customers. The 2023 OLED EVO, launched last April, requires only 40% of plastic use compared to LCD TVs and has the effect of reducing annual plastic use by approximately 20,000 tons. with substantial application of recycled plastic on the product main body, we expect to achieve a used plastic recycling effect amounting to 3,200 tons yearly. In particular, we have received recognition for the eco-friendly effect across the production, delivery, use and disposal of all models and acquired certifications from Carbon Trust of UK and SGS of Switzerland respectively for three years in a row. We have boosted our functional materials business by utilizing in-house developed glass formation design technology. Our antimicrobial glass powder has antibacterial and antifungal functions to various materials including plastic and has been applied to our refrigerators, washing machines, air conditioners since 2022. We are also expanding our green business through clean technology by developing marine glass that melts in water and can be applied to help restore marine ecosystems. We believe accessibility is an important initiative driven under ESG management and have launched a variety of relevant products and services. Recently, we released a new Kiosk product with much improved accessibility for the digitally challenged. This product offers a visually enhanced mode to show bigger fonts and sharper images and low position mode which places main menu options at the lower part of the screen to enable customers using wheelchairs or of short height to use the product more easily. The Kiosk product and LG Electronics were the first to acquire their certification of public procurement pre-order for intelligent information products in the Kiosk sector from the Ministry of Science and ICT. Our technology also received much recognition externally in our efforts to provide a better life for all and we were named the most sustainable home appliance brand in 2023 GreenBuilder Sustainable Brand Index. GreenBuilder Media is a leading green building and sustainable living media company in the US. We boast global top level energy efficiency with our products listed in all five categories for sustainable washers and dryers named by Consumer Reports, a major authority on consumer products. We will continue to offer innovative customer experience through differentiated products and services that deliver ESG values and see business opportunities in line with ESG management to not only enhance our corporate value, but also drive a better life for all. 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.