Lg Elec S/Gdr 144A

Good afternoon. My name is Wonjae Park from Investor Relations. Thank you for joining our earnings call for the second quarter of 2025. With me are CFO and EVP of LG Electronics, Changtae Kim, SVP of HS Company, Lee Kwon Kim, SVP of MS Company, Sangok Park, VP of VS Company, Ju Yong Kim, VP of ES Company, Donghun Shin, VP of Corporate Business Management , VP of Accounting , VP of Finance , and Head of ESG Strategy . Today's presentation will proceed as follows. Our CFO will begin by presenting our second quarter results and outlook for the third quarter of 2025, including our strategic direction for qualitative growth. Then I'll present the key financial highlights of the second quarter. Following that, each business will present its individual results and outlook. Finally, we will conclude with an overview of our ESG activities and achievements. Please note that all statements we make today regarding the financial results of the second quarter are subject to change in accordance with external review. Actual results may differ from today's outlook and forward-looking statements due to market uncertainties and strategic changes. Now let us begin with the performance of the second quarter of 2025 and the outlook for the third quarter. Good afternoon. I'm Changtae Kim, CFO of LG Electronics. Our consolidated Q2 financial results show 20.74 trillion won in sales and 639.4 billion won in operating profit. Q2 revenue declined year over year due to hedge winds, including U.S. tariff policy changes and geopolitical risks in the Middle East, which led to a delay in consumer sentiment recovery. Despite these challenges, we are laying the foundation for qualitative growth, particularly within our subscription services, online direct sales, and B2B segments. Operating profits declined year-over-year due to the increasing pressure of tariff-related costs, stagnant market demand for TVs, and intensified competition. On the other hand, we maintained last year's profitability for some businesses while achieving year-over-year improvements for others through enhanced operational efficiency. US tariff policies weakening consumer sentiment, geopolitical risks, and ongoing uncertainties will likely continue into Q3. Strong competition, higher marketing expenses, and price hikes due to derivative tariffs are pressuring the business. To address this challenge, we will mitigate the impact of escalating U.S. tariffs by employing various strategies, including optimizing production across our global network. Additionally, we will strengthen our premium market position through region and segment-specific strategies while expanding into the mass market to secure sales growth momentum. We will continue pursuing qualitative growth by focusing on high growth areas within B2B, such as automotive electronics and HVAC, as well as on subscriptions and webOS to boost profitability. Mounting costs due to competition will be mitigated by improving our cost structure and operational efficiency to maintain stable profitability. I will now discuss the progress and plans for qualitative growth. LGE is achieving meaningful results in establishing the foundation for qualitative growth, central to our business portfolio transformation. We expanded our B2B segment including automotive electronics, HVAC, smart factory, and component solutions. We also maintain solid growth in D2C, such as subscriptions and online direct sales. Furthermore, we are accelerating the growth of non-hardware businesses, including the webOS platform, specialized care, and HVAC maintenance. Our success is built on strong, long-term partnerships with B2B clients and direct relationships cultivated through our subscription services and online direct sales. This foundation provides a distinctive competitive advantage in a dynamic market, ensuring greater stability and profitability. Going forward, we will accelerate our transition to a customer-centric model by offering tailored solutions to foster customer loyalty and strengthen retention. Finally, we remain committed to enhancing corporate value through our shareholder return program. Yesterday, we announced the record date and amount of our interim dividend, as well as the planned cancellation of treasury stock at the end of this month. We are dedicated to enhancing value for both the company and our shareholders.

Thank you.

I'll now briefly review the Q2 2025 performance of the enterprise-wide operations in each business. Our consolidated financial results for Q2 are 20.73 trillion won in sales and 639.4 billion won in operating profit. HS recorded 6.59 trillion won in sales and 439.9 billion won in operating profit. MS recorded 4.39 trillion won in sales and 191.7 billion won in operating loss. VS recorded 2.84 trillion won in sales and 126.2 billion won in operating profit. Lastly, ES recorded 2.64 trillion won in sales and 250.5 billion won in operating profit. Since the Q1 2025 earnings release, we have highlighted the performance of our B2B and subscription businesses. These are key drivers of qualitative growth aligned with our portfolio transition initiative. In Q2, despite a slight quarter-over-quarter sales decline in commercial displays and chillers, Our B2B segment sustained year-over-year sales growth. This growth was driven by VS sales expansion supported by a healthy order backlog and financial improvement within ES system AC business. The B2B segment's contribution to overall sales also increased both quarter-over-quarter and year-over-year. Subscription services in Korea maintained strong sales growth of nearly 30% year-over-year driven by differentiated care services. Our overseas subscription business also achieved both quarter-over-quarter and year-over-year sales growth fueled by vigorous subscriber acquisition and portfolio expansion. Despite being in its early stages, The contribution of overseas subscriptions to total subscription sales also increased year-over-year as we accelerated business expansion. We will continue developing our business portfolio, including B2B and subscription services, to improve overall business performance. Moving on to the income statement and cash flow for Q2. 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, net income for Q2 was 609.7 billion won. As a result, first half net income attributable to controlling interest reached 1.40 trillion won, up 36% year on year. Now, let's look at cash flow. Cash flow from operating activities was 1.54 trillion won and cash flow from investing activities was 185.7 billion won resulting in net cash flow of 1.51 trillion won. When reflecting cash flow from financial activities of negative 921.4 billion won, cash balance at the end of Q2 came to stand at 7.57 trillion won of 590.7 billion won increase from the previous quarter. Key financial position and indicators for Q2 2025 are as follows. At the end of Q2, assets stand at 62.4 trillion won, liabilities at 36.5 trillion won, and equity at 25.9 trillion won. In terms of leverage ratios, liability to equity, debt to equity, and net debt to equity all decreased quarter-over-quarter, reflecting a healthy financial condition. Now, we will hear from each business company regarding its Q2 results and Q3 outlook, beginning with HS Company.