Lg Elec S/Gdr 144A

Good afternoon. My name is Wonjae Park from Investor Relations. Thank you for joining our earnings call for the third quarter of 2024. With me are CFO and EVP of LG Electronics, Jangtae Kim, SVP of Global Business Management, Sangho Park, VP of Home Appliance and Air Solutions, Lee Gwang Kim, VP of Home Entertainment, Jung Il Lee, VP of Vehicle Component Solutions, Joo Young Kim, VP of Business Solutions, Dongchul Lee, VP of Corporate Business Management, Joong-Yeon Park, VP of Accounting Division, Hong-Soo Lee, Head of Finance, Young-Gyun Kim, and Head of ESG Strategy, Sung-Min Hong. Here's today's presentation agenda. First, our CFO will outline our corporate value of programs, which were announced on October 22nd, as well as the result of the third quarter and the outlook for the fourth quarter, Then I'll present financial highlights. Subsequently, each division will take turns to deliver its business results and outlook. And finally, we will conclude with an overview of our ESG activities and achievements. Please note that all statements we'll be making today regarding the financial results of the third quarter are subject to change in accordance with the results of the external review. Uncertainties in the market and changes in strategies may cause our results to be different from the outlooks and forward-looking statements made today. Now, let us start with our value-of-plans and move on to the consolidated financial results for the third quarter of 2024 and the outlook for the fourth quarter. Good afternoon. My name is Chung-Tae Kim, CFO of Web Electronics. As part of our effort to fully reflect our intrinsic value, we announced our corporate value of plans on October 22. In the announcement, we outlined detailed strategies and plans for achieving our mid- to long-term goals and directions, which has been communicated through events such as the Future Vision 2030 press conference and this year's investor forum. We have set mid- to long-term goals of achieving the 777 target by 2030, a 7% average annual growth rate, a 7% operating profit, and a 7-fold increase in EV EBITDA multiples aiming to post no less than 10% in ROE by 2027. To this end, we are focusing on expanding our platform-based services and B2B businesses, as well as identifying new high-growth potential areas that align with our capabilities. By innovating our business portfolio, we aim to increase the contribution of these businesses to 52% of total revenue and 76% of operating profit by 2030. We have decided to increase the distributable profit to no less than 25% of the net profit attributable to the owners of the parent, excluding one of non-recurring profits. Additionally, we have introduced a minimum dividend of $1,001 per common share per year, along with a semi-annual dividend scheme. We are taking a multifaceted approach to improving our shareholder return policy, including Treasury stock strategies. We will keep the market informed of any changes we adopt through disclosures and other means. Let's move on to our business results of the third quarter and the outlook for the fourth quarter. Despite a delayed recovery in EV demand, Q3 revenue grew year over year, driven by increased appliance sales in emerging markets, a rise in OLED TV sales, and accelerated growth in incubating businesses, such as subscription and webOS platform services. However, operating profit saw a decline due to continued pressure from rising logistics costs, LCD panel prices, and fixed costs associated with delayed EV component sales. Looking ahead to Q4, the business environment remains challenging. Delays in demand recovery and market uncertainties are expected to persist, with risks posed by gradual interest rate cuts and potential oil price fluctuations triggered by geopolitical tensions in the Middle East. Global shipping rates, on the other hand, are stabilizing, alleviating concerns over further increases in logistics costs. We aim to achieve year-on-year revenue growth by expanding our home appliance business and actively responding to the increasing demand for TVs, and vehicle components, including in the infotainment sector. To maintain stable profitability, we will focus on high margin products, efficiently allocate the marketing resources, and optimize global operations. Despite ongoing global macroeconomic uncertainties, a prolonged demand slump, and intensified competition, we will leverage our unique competitive strength to proactively address the rapidly changing external environment and achieve our desired outcome. I'll now briefly review the third quarter performance of each business. H&A recorded $8.3 trillion in sales, $527.2 billion in operating profit, and 6.3% in profitability. HE recorded 3.7 trillion won in sales, 49.4 billion won in operating profit, and 1.3% in profitability. VS recorded 2.6 trillion won in sales and 1.1 billion won in operating profit. Last but not least, BS recorded 1.3 trillion won in sales and 76.9 billion won in operating loss. Let's move on to the profit and loss and cash flow of the third quarter. 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 operation, we posted 90.2 billion won in net income. Next on cash flow. Q3 cash flow from operating activities was 207.2 billion won, and cash flow from investment activities was negative 754.1 billion won, resulting in net cash flow of negative 727.5 billion won. When recollecting cash flow from financial activities of negative 134.6 billion won, cash balance at the end of Q3 came to spend at 7.69 trillion won, 862.2 billion won decrease from the previous quarter. Next is a key financial position and indicators for the third quarter of 2024. As of the end of the third quarter, assets stands at 64.3 trillion won, liability at 39.9 trillion won, and equity at 24.4 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 let's turn the call over to each business for its third quarter results and fourth quarter outlook. We'll begin with H&A. Let me share the third quarter outlook, third quarter results of H&A. We achieved year-over-year revenue growth despite the delayed demand recovery in the global appliance market driven by the expanded sales of B2B product and steep growth in our subscription business. Operating profit reached the level at least equal to that of the same period last year, despite increasing pressure from logistics costs thanks to revenue growth and initiatives to improve material expenses and productivity. Next is the outlook for Q4. The domestic market is expected to remain stagnant while the overseas market is projected to recover, supported by improvement in leading economic indicators in major countries, such as a rise in global trade volume and interest rate cuts. However, uncertainties persist due to the ongoing geopolitical risks and the unpredictability surrounding the U.S. presidential election, among other factors. In response to the market, we plan to introduce new products tailored to local market needs and expand the volume zone segment to produce additional revenue and strengthen our online and subscription businesses to sustain our growth momentum. Furthermore, we'll enhance our productivity to optimize manufacturing costs and marketing expenses to secure profit. Next is the third quarter result of home entertainment business. Sales continue to grow year over year, fueled by increased TV hardware sales, particularly in Europe, and a surge in OLED TV shipments. The expansion of webOS-based advertisement and content business has also contributed to this upward trend. Operating profit, however, posted a small drop year-over-year due to ongoing cost pressure stemming from rising LCD panel prices. Let's move on to the fourth quarter outlook. In terms of overall market demand for TVs in Q4, we expect to see a slight year-over-year improvement. The demand recovery is likely to be more pronounced in the volume zone than the premium segment. Accordingly, we aim to accelerate sales growth and enhance our contribution to overall profitability by continuing to increase the sales of premium products such as OLED and QNED TVs, strengthen the competitiveness of master products to meet the volume zone demands, and expanding partnerships to grow the ecosystem of the webOS platform. Next is the third quarter result of the vehicle component solution business. For sales, we are able to maintain year-over-year growth momentum. However, quarter-over-quarter sales saw a slight dip due to stagnant demand in the EV market. Operating profit decreased year-over-year, impacted by reduced sales and increased R&D costs for upfront investment in the mass production of existing projects and future preparations for SDV. Next is the outlook for the fourth quarter. The market environment suggests that the demand for finished vehicles is likely to grow compared to the previous quarter. However, due to stagnation in EV demand, the growth rate is projected to be slower than previously forecasted. Against this backdrop, despite these headwinds, We plan to continue growing sales and strengthening our market position based on orders on hand and secure profitability by improving our product mix and optimizing operational costs. Let me present the third quarter result of the business solution. Q3 revenue grew year over year thanks to increased sales of gaming monitors, LED signage, and other strategic products, a large volume of PC orders from B2B partners, and revitalized sales in online channels. Our operating profit experienced a deeper deficit due to a competition triggered drop in average selling prices, rising logistics and material costs, and increased resource allocation towards the growth of new business areas. Now let me turn to the fourth quarter outlook. Market demand for monitors and infotainment display business is likely to be similar to that of the previous quarter. Demand for PCs in general, however, is expected to be sluggish, but we believe that demand for premium laptops will grow year over year as the market is showing more interest in AI-powered PCs. Against this backdrop, we will concentrate on improving profitability by first growing year-over-year sales of the IT business by capitalizing on emerging opportunities in vertical markets, second, increasing sales of strategic products and invigorating online channels for IT products, and third, improving the efficiency of our resource management and optimizing cost structure. Last but not least, our ESG activities and achievements. LG Electronics has been widely recognized for its competitiveness in high-efficiency, eco-friendly products. With the grand prize awarded to our Turbo Heat Pump, we have received a total of 10 awards at the 27th Energy Winner Awards, including the Carbon Neutrality Award. This marks our eighth consecutive year as the most awarded company in home appliance category. Additionally, 15 products were selected as this year's green product, chosen together with consumers by the Korean Green Purchasing Network marking the fifth consecutive year of being selected as a green masterpiece. Meanwhile, five models of our TVs and Trom Wash combo were certified as the first e-cycle excellent product of the year by e-cycle governance. Our products and services are recognized not only for their eco-friendliness but also for their excellent ease of use and accessibility. The LG Comfort Kit, an accessory designed to help all customers use appliances easily, secured the gold medal at the International Design Excellence Awards. Additionally, in the 2024 Korea Service Quality Index organized by the Korean Standard Association, LG E ranked first in the home appliance AES category for our improved customer AES experience and visibility, in the call center quality index for the introduction of AI assistance solution. Our competitiveness in sustainable products and services stem from our commitment to responsible technological innovation. Our B2X module, which enables communication between vehicles and surrounding objects, has achieved common criteria certification for its security, making a world first. Additionally, we are collaborating with Altair, a leading American simulation company, to develop solutions that extend the lifespan of automotive electronic components, thereby enhancing the reliability of our product in this sector. We'll continue to strengthen our competitiveness in sustainable products and services as a smart life solution company. That brings us to the end of the third quarter earnings release and outlook for the fourth quarter. We'll 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 presented by Kangho Park from Daeshin Securities. Please go ahead with your question.

Yes, thank you for the opportunity to ask a question. I am Kangho Park from Daeshin Securities. I have two questions for you. Recently, there has been an additional question about the stock contract. Elec S & Gdr 144A Elec S & Gdr 144A