LG Display sees price falls easing after disappointing

SEOUL Thu Oct 20, 2011 3:31am EDT

SEOUL (Reuters) - South Korean flat-screen maker LG Display (034220.KS), a key supplier to Apple Inc (AAPL.O), posted a wider-than-expected quarterly loss on Thursday as tepid demand for TVs and PCs hit panel prices and one-off losses weighed.

LG Display, which vies with home rival Samsung Electronics Co (005930.KS) for the top position in LCD flat screens globally, said it expected panel price falls to slow in the current quarter from the previous quarter.

Panel makers are struggling with a weaker-than-usual seasonal demand pick-up in the second half of 2011 as an uncertain global economy slows demand for TVs, desktop monitors and notebook PCs, depressing panel prices.

Consumers are also increasingly turning to mobile devices such as Apple's popular iPad and iPhone, sapping demand for traditional desktop computers and laptops.

LG Display said its July-September operating loss was 492 billion won ($434.6 million) versus an average forecast of a 196.5 billion won loss in a poll by Thomson Reuters I/B/E/S.

That marked its fourth consecutive quarterly loss and compared with an operating loss of 48 billion won in the previous quarter and an operating profit of 182 billion won a year ago.

The company blamed foreign currency translation losses and additional provisions for the wider-than-expected losses.

"LG Display expects total display shipments to increase by a low single-digit percentage in the fourth quarter compared to the third quarter. Also, further decline in panel prices is expected to be limited," James Jeong, CFO of LG Display, said in a statement.

LG Display is a key panel supplier for Apple's popular iPad and iPhone. Apple on Tuesday reported quarterly results that missed expectations for the first time in years, blaming rumors of the new iPhone for hurting demand in the September quarter.

LG Display is also expected by analysts to be making panels for Amazon.com Inc's (AMZN.O) Kindle Fire tablet due to be released in the fourth quarter.

LG Display said revenue from handsets, tablets and other "smartbook" panels jumped to a combined 20 percent of its total from 11 percent a year ago, while the portion of TV panels dropped to 47 percent from 58 percent.

Shares in the panel maker ended down 0.2 percent before the results, in a wider market .KS11 that was down 2.7 percent.

They have slumped 42 percent this year, underperforming the wider market's 12 percent fall.

Some investors have a favorable view on the stock.

"Its share prices are bottoming out, while LG Display is gaining a firm footing as No.2 in the sector," said Jung K.S., a fund manager at Eugene Asset Management that owns LG Display shares. "Facing a challenging economic landscape, many of its peers would be knocked out."

WEAK DEMAND

LG Display said its average selling price fell 10 percent in the third quarter from a year ago.

Weak demand in advanced economies and chronic overcapacity have delayed the much-anticipated recovery of panel prices, forcing panel makers to cut investments.

Research firm DisplaySearch said earlier this month that it had cut its global demand outlook for TVs this year, citing lower business targets for this year from TV manufacturers and lower-than-expected demand for key TV components in the run-up to the year-end holiday season.

"Emerging markets continue to show good growth, but it is not strong enough to counteract the weaker demand in developed markets," noted Paul Gagnon, Director of North America TV Research for DisplaySearch.

Research firm IDC also said this month that worldwide PC shipments increased by a lower-than-expected 3.6 percent in the third quarter from a year earlier, and expected the growth to stay in mid-single digits in the current quarter.

LG Display said in August that it would reduce next year's capital spending by around a quarter from this year after it had already cut this year's investment plan by around 1 trillion won in July to slightly over 4 trillion won.

LG Display's smaller rivals Taiwan's AU Optronics (2409.TW) and Chimei Innolux Corp (3481.TW) have also slashed their capital spending plans for this year.

Growth prospects of 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.

Concerns also linger that the industry's oversupply could be exacerbated by an upcoming addition of production capacity in China. Asian LCD makers such as Samsung Electronics, LG Display and AU Optronics plan to build new plants in China to tap into what is expected to be the world's biggest LCD TV market.

($1 = 1132.050 Korean Won)

(Editing by Jonathan Hopfner and Muralikumar Anantharaman)

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