LG Display posts 3rd straight qtrly loss, gives no outlook

LG Display posts 3rd straight qtrly loss, gives no outlook

Seoul: Flat-screen maker LG Display declined to provide an outlook after posting its third consecutive quarterly loss on Thursday, as economic uncertainty hangs over consumers and dims prospects for a recovery in depressed demand from TV makers.

The South Korean firm joins Intel Corp and Hynix Semiconductor Inc in warning of uncertain prospects in the coming months, as debt problems in Europe and the United States turn consumers reluctant to buy new TVs and computers.

The poor result from LG Display, which kicked off the reporting season for major Asian LCD makers such as Samsung Electronics and AU Optronics , bodes ill for the sector.

“July will be the most difficult month in the third quarter for LG Display as there’s no meaningful demand pickup from TV manufacturers yet, and that will continue to make its TV panel business unprofitable until August," said Kwon Sung-ryul, an analyst at Dongbu Securities.

“Market conditions will only improve from September, led by a modest price recovery in television screens and computer monitors."

This is for the first time that the company declined to provide forecasts for its shipment and key panel price trend for the following quarter.

LG Display, which vies for the top position in LCD flat screens globally with home rival Samsung, also cut its 2011 capital expenditure plan by around 1 trillion won, or 18%, to low to mid 4 trillion won and is considering further reduction.

Demand for large-sized displays such as TV screens and computer monitors, which together account for around 70% of LG’s revenue, is also taking a hit as consumers opt for smaller smartphones and tablets.

“As uncertainties over market demand persist in the third quarter, we expect customers to maintain a conservative approach to their inventory strategy," LG chief financial officer James Jeong said in the company’s earnings statement.

“LG Display will continue... reasonably adjusting input resources."

Apple Boost

Still, LG is expected to fare better than key rival Samsung, partly by being a key panel supplier for Apple’s iPad and iPhone.

Blockbuster sales of the iPhone and strong Asian business again helped Apple crush Wall Street’s expectations on Tuesday, boosting LG Display shares by as much as 6.5% the following day.

LG Display said revenue from tablet and e-book panels jumped to 10% of its total from virtually zero a year ago, while sales of TV panels dropped to 48% from 53%.

The company reported an April-June operating loss of 48 billion won ($45.5 million), versus the consensus forecast for a 40 billion won loss in a poll by Thomson Reuters I/B/E/S.

The loss narrowed sharply from the 239 billion won shortfall in the first quarter and analysts expect the firm to return to a small profit in the current quarter, helped by the increasing portion of premium products such as 3D panels and displays for smartphones and tablets in its product mix.

The company swung to a net profit of 21 billion won from a 115 billion won loss in the previous quarter, due to lower financing costs and lack of any dividend payout. The profit is still down 96% from a year ago.

Tepid TV, PC Sales

Panel makers are bracing for a weaker-than-usual seasonal demand pickup in the second half as an uncertain global economy further slows TV demand and output continues to outpace demand.

Growth prospects for LCD TV panels are dim because many households in developed countries have already traded their bulky TV sets for flat-screen TVs and have more than one LCD TV set.

Supplies of LCD TV panels sized over 40 inches jumped 82% over the past three years, far outstripping a 16% growth in demand, according to estimates by KB Investment & Securities, as panel makers rushed to invest.

“TV demand was weak not just in Western Europe and North America, but also in China. Growth in China, which many had expected at around 30%, was only around mid-teen%... TV market is simply stalled," CFO Jeong said.

“Demand will increase as we move into the September and October period but it is difficult to expect a dramatic uptrun in the supply and demand balance... It would be difficult for the market conditions to improve sharply until early next year."

PC sales grew only 2.3% in the second quarter, according to tech research firm Gartner, well below its earlier projection for a 6.7% growth. Intel cut its forecast for 2011 PC unit sales and warned of softness in mature markets.

LCD TV panel prices were expected to snap a year-long decline and rebound from the second quarter, but that expectation has now been pushed out to the third quarter.

Panel makers are reducing production and may have to tighten supply again later this year due to sagging demand from TV makers, analysts said.

LG Display said it would not update its expectations for the market until the third quarter’s results announcement.

Shares in LG Display have dropped by a quarter over the last three months in a steady market .

Prior to the results, the stock closed down 1% versus a 0.5% drop in the broader market.