LG Display has reported a negative earnings surprise for the third quarter of this year.
The company announced on Oct. 23 that it recorded an operating loss of 436.7 billion won in the third quarter, a turnaround from a surplus of 140.1 billion won a year ago, on sales of 5.82 trillion won, a year-on-year drop of 5 percent.
A consensus estimate of the display maker’s operating losses in the third quarter was slightly more than 300 billion won, but its actual losses turned out to be far greater than had been expected. The company’s cumulative losses during the three quarters of this year has reached 937.5 billion won.
LG Display’s massive operating loss resulted from a sharp decline in the prices of LCD TV panels, which account for a significant proportion of its sales. According to IHS Market, the price of 65-inch LCD panels recorded US$167 per unit this year, down 31.8 percent from US$245 in September last year. More than 80 percent of its sales come from LCD panels.
The company’s loss was also caused by a drop in the operation of LCD panel production lines due to a fall in LCD panel prices and a rise in depreciation expenses resulting from the recent operation of its new OLED plant.
As for sales by item in the third quarter, panels for TVs accounted for 32 percent of the revenue, a 9 percent decline from the previous quarter. In addition, panels for mobile devices stood at 28 percent, a quarter-on-quarter increase of 9 percent, driven by the increasing production of plastic OLED panels. Panels for notebook and tablet PCs accounted for 21 percent and panels for monitors for 18 percent.
LG Display continues to suffer losses in the fourth quarter. The one-time expense of 500 billion won resulting from the stop of P8 lines in Paju and a massive voluntary retirement is highly likely to be created within this year. Therefore, the industry expects that the display maker will reach a maximum of more than one trillion won in loss this year.
LG Display plans to reform its business structure and increase OLED production in the second half of the year, gradually improving its profitability from early next year. “We will complete efforts to improve our LCD business structure as soon as possible and communicate with the market by setting up a long-term vision focusing on technologies and products that can provide differentiated value,” said Suh Dong-hee, LG Display Chief Financial Officer. He also added, “We will step up the effort to accelerate the trend for large-size OLED display and make a steady effort to stabilize the business of plastic OLED for smartphones as soon as possible.”