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 2023. 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 and 1 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 ELSA Electronics Earnings Release Conference Call for the third quarter of 2023. With me are representatives of each Business Management Division, Mr. Lee Kwon Kim from Home Appliance and Air Solution, Mr. Jung Hee Lee from Home Entertainment, Mr. Joo Hyun Kim from Vehicle Component Solutions, Mr. Dong Chul Lee from Business Solutions. We are also joined by Mr. Sang Ho Bak from Global Business Management Group, Mr. Chung Hyun Bak from Corporate Business Management Division, Mr. Hyun Kyu 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 third 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 third quarter of 2023 and the outlook for the fourth 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 third quarter of 2023 and the outlook for the fourth quarter. Consolidated sales of the third quarter was 20.7 trillion won and operating profit was 996.7 billion won. Despite the revenue impact from sluggish demand for TV and IT products, Q3 revenue grew year on year on the back of sound appliance sales and growth in vehicle component business. In particular, the Korean market drove the revenue growth amidst slowing demand by expanding revenue from appliance subscription-based rental and care service. Operating profit increased by a large margin year on year with stable raw material prices in appliance and TV Enhanced Efficiency in Spending and Operating Leverage Effect in Vehicle Component. I will now briefly review the third quarter performance of each business. H&A recorded 7.5 trillion won in sales, 504.5 billion won in operating profit, and 6.8% in profitability. HG recorded 3.6 trillion won in sales, 110.7 billion won in operating profit, and 3.1% in profitability. BS recorded 2.5 trillion won in sales, 134.9 billion won in operating profit, and 5.4% in profitability. BS recorded 1.3 trillion won in sales and 20.5 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 third 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 485.2 billion won in net income. Next on cash flow. Q3 cash flow from operating activities was 1.7 trillion won, and cash flow from investment activities was negative 1.2 trillion won. Accordingly, net cash flow was 519.5 billion won. When reflecting cash flow from financial activities of 354 billion won, cash balance at the end of Q3 came to stand at 8.1 trillion won, a 873.5 billion won increase from the previous quarter. Next is the key financial position and indicators for the third quarter of 2023. As of the end of the third quarter, assets stood at 61.9 trillion won, liability at 37.7 trillion won, and equity at 24.2 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 fourth quarter. In terms of the business environment, continued monetary tightening in major countries, elevated international conflicts, and unstable oil prices are expected to lead to heightened uncertainty in the global economy and intensified competition. We will secure growth momentum by accelerating changes to our business portfolio, including the shift to expand B2B business, and continue efforts for profitability through preemptive risk management activities and enhanced operation efficiency. Q4 revenue is expected to grow year-on-year on the back of increased sales of major appliance products and growth in vehicle component business. We expect profitability to improve year-on-year at a time of year-end peak season promotions through efficient spending and inventory management. Now let's move on to the third quarter results and fourth quarter outlook by business. We will start with H&A. Let me share the third quarter results of H&A. though stagnant market demand and intense competition persist. Revenue was maintained at similar levels to the previous year by strengthening focus on the volume zone and expanding new business areas such as appliance subscription. Operating profit improved significantly year on year despite increased marketing spending to preemptively address competition by maintaining stable operations in terms of material and logistics costs. Next is the outlook for Q4. market uncertainties are expected to worsen with the sluggish global economy, prolonged slowdown in consumer sentiment, as well as the recent heightened geopolitical risk in Europe and the Middle East. Amid this environment, we will seek to enhance both revenue and profitability year on year by responding nimbly to shifts in demand in major regions and running stable operations regarding production and inventory management. I will share the third quarter results of HE. Sales declined year-on-year due to the geopolitical risk in Europe and intensified competition in the premium segment, but the level of decrease was reduced compared to the previous quarter as we increased sales volume in responding to the peak season. Despite the cost pressure from rising LCD panel prices, operating profit improved by a large margin through profitability-based operations including enhanced efficiency in marketing spending by managing channel inventory at appropriate levels. Now let me share the outlook for the fourth quarter. In the market, demand is expected to pick up compared to the previous quarter upon entering the busiest months of the peak season, but intense competition is expected to continue due to delayed recovery in global demand. Accordingly, we will seek to secure profitability by addressing peak season demand and spending marketing expenses efficiently based on optimized collaboration with retailers. Let me share the third quarter results of ES. Revenue grew year on year thanks to increased sales of electric vehicle components following the continued growth in order backlogs. We achieved record high quarterly profit as the electric vehicle component business contributed more to profitability based on revenue growth and improvements were made to the cost structure. Next, the outlook for the fourth quarter. Though there are concerns of a slowdown in global demand for vehicle components, along with slowing growth in electric vehicles, there are also expectations of rising demand for high-value-add vehicle components based on the transition to electric vehicles. Accordingly, we plan to continue growing our top-line and bottom-line year-on-year by doing our utmost to respond to demand in high-value-add component projects and enhancing operation efficiency with the LG Magna E powertrain plant in Mexico. I will share the third quarter results of BS. Sales decreased year on year, impacted by delayed recovery in IT demand and slowing growth for information display business due to fiercer competition. Operating profit decreased year on year due to the drop in revenue for major products and the increase in spending for new businesses such as robot and EV charging. Now let me share the outlook for the fourth quarter. IT demand is expected to turn around by a small margin, but risks stemming from uncertainties in the global economy are expected to remain. Information display market is projected to maintain a growing trend, but the pace of growth may be somewhat subdued. We will pursue top-line growth by expanding sales of new and strategic products and exert efforts to secure profitability through proactive actions to address B2B demand and efficient spending of resources. Last but not least, let me share our ESG activities and achievements. Under the theme of sustainable life, joy for all, we presented premium appliances and energy solutions for sustainability of the planet and people at IFA 2023, Europe's largest exhibition of home appliances. LG Smart Pottage is a small modular housing incorporating our energy and HVAC technologies as well as differentiated premium appliances. It is a housing model representing the pinnacle of energy efficient technology and we have established home energy solutions that enable energy production through solar panels, energy saving through heat pump based heating cooling systems, and energy storing through residential ESS. Through the Net Zero Vision House, we showcase not only our energy efficient appliances, but also a home energy platform that enables easy control of appliances via the Thank You app, as well as monitoring of energy storage and consumption levels. We also unveiled the Universal Up Kit, which are detachable accessories that help all consumers use our products easily, regardless of gender, age, or physical limitations. Recognizing our efforts to develop eco-friendly energy efficient products We made a record of receiving the most awards for seven consecutive years by winning nine main awards in the 26th Energy Winner of the Year hosted by Consumers Korea and sponsored by the Ministry of Trade, Industry and Energy, Ministry of Environment, and Korea Energy Agency. 18 of our products won awards in the appliance sector at the 2023 Korea's Green Product of the Year, whose winners are selected by consumers directly. This was the largest number of awards won by a single company in the industry We are also the only awardee to be acknowledged for the longest period of 14 consecutive years. Through our technology and financial support, we are making efforts to strengthen suppliers' ESG capabilities, manage a stable supply chain, and subsequently enhance manufacturing competitiveness. In addition to the existing win-win growth fund of 200 billion won, we formed an ESG fund of 100 billion won to enable suppliers to secure financing needed for ESG management with low or no interest. Suppliers are able to use the fund for activities to reduce greenhouse gas in the supply chain through carbon reduction, new low-carbon technology and transition to renewable energy. We are also holding events to identify and share best practices for improving productivity in manufacturing processes among suppliers in Korea and overseas to enhance suppliers' manufacturing competitiveness. We will continue to improve product and service competitiveness with differentiated clean technology and design to drive our vision of creating a better life for all. That brings us to the end of the third quarter earnings release and outlook for the fourth 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 number star and 1. For cancellation, please press star and 2 on your phone. The first question will be provided by Jisan Kim from Qium Securities. Please go ahead with your question.

Please go ahead with your question.