LG Display posts strong profit on TV screens

SEOUL (Reuters) - LG Display Co (034220.KS), the world's second-biggest LCD panel maker, posted record quarterly operating profit, and is set to gain further as this summer's Beijing Olympic Games will fuel demand for thinner TVs.

Makers of liquid crystal display (LCD) panels saw solid demand and stable pricing in what is normally a slow first quarter, helped by drastic investment cuts they made last year in the wake of the huge oversupply that savaged earnings in 2006.

"Earnings were boosted by better-than-expected LCD sales and effective cost cutting," said John Soh, an analyst at Goodmorning Shinhan Securities.

Earnings should increase further in the second and third quarters, with LCD TVs flying off the shelves ahead of the Olympics in Beijing in August.

"LCD demand is exploding ahead of the Beijing Olympics and is likely to remain solid this year," said Chang In-whan, chief executive and fund manager at KTB Asset Management.

LG Display is expected to more than double its net profit in 2008 to 2.7 trillion won, according to Reuters Estimates.

January-March operating profit on a consolidated basis was 881 billion won ($903 million) against a 208 billion won loss a year before.

Net profit was 717 billion won ($735 million) against a 169 billion won loss a year earlier and the previous quarter's record 760 billion won net profit. The result just topped the 715.5 billion won forecast by eight analysts surveyed by Reuters.

"Considering the first quarter is usually a demand-low season, LG Display's profit was very strong, mainly supported by its increased investment in panels for mobile electronics such as laptops," said Yoon hyuk-jin, analyst at Shinyoung Securities.

Besides strong demand, a weaker won currency and improved production yields boosted earnings at LG Display (LPL.N), which competes with leader Samsung Electronics Co Ltd (005930.KS) and Taiwan's AU Optronics Corp (2409.TW).

First-quarter sales on a consolidated basis rose 48 percent to 4.04 trillion won, in line with forecasts.

SONY EFFECT

The South Korean company, formerly LG.Philips LCD, said it expected the average price of its panels to fall by a mid-single digit percentage in the second quarter, after falling a smaller-than-expected 2.6 percent in the first.

Its margin on earnings before interest, tax, depreciation and amortization (EBITDA) was 40 percent, almost unchanged from 41 percent in the fourth quarter.

Chief Financial Officer James Jeong told an investor meeting LG Display was likely to post an EBITDA margin in the mid- to high-30s percent range.

He said Sony Corp's (6758.T) aggressive TV pricing strategy, in its drive to become the world's No.1 TV maker, could affect screen prices and sales in the second quarter.

Jeong said he expected only a limited impact from a plan by shareholder and major client Philips Electronics (PHG.AS) to transfer its struggling North American TV business to Japan's Funai Electric (6839.OS), which had triggered concerns that LG Display could lose screen orders for that market.

Analysts expect the market to tilt toward oversupply again at the end of the year, but many say the scale of excess production will be much smaller than in 2006.

"A slowing U.S. economy, the world's top IT market, and expansion of capacity are concerns as they will cause an oversupply problem in the industry," said KTB's Chang, adding those fears have prevented LG Display shares from fully reflecting the company's healthy results.

Research firm iSuppli forecasts worldwide LCD TV shipments will top 100 million units this year, up from 78.5 million in 2007. LCD TV sales in the booming China market are set to grow faster, to 15.5 million units this year from 8.8 million in 2007.

LG Display said this week it would increase capacity at one of its two module plants in China to 20 million units a year by 2010, from 11 million units currently.

Shares in LG Display fell 10 percent in the first quarter, in line with the broader market's 10 percent loss.

(Additional reporting by Cheon Jong-woo and Kim Yeonhee; Editing by Keiron Henderson & Ian Geoghegan)