UPDATE 1-LG Display cuts Q3 forecasts on LCD market slump

(Adds details, analyst comments)

By Marie-France Han

SEOUL, Sept. 10 (Reuters) - South Korean flat panel maker LG Display (034220.KS) slashed its third-quarter outlook, saying the price of liquid crystal display (LCD) panels had dropped more than expected, in another sign of a deepening downturn in the tech sector.

The company, the world's second-biggest maker of LCD panels, said on Wednesday its third-quarter earnings results were unlikely to meet initial forecasts, and offered a new set of forecasts.

Aggressive capacity expansion by panel suppliers has led to oversupply this year, weighing on LCD panel prices. Slower LCD TV demand than expected in China in the run-up to and during the Beijing Olympic Games has also hurt prices of panels used in flat-screen TVs.

South Korea-based LG and smaller Taiwan rivals AU Optronics Corp (2409.TW) and Chi Mei Optoelectronics Corp (3009.TW) have cut output in recent months, to cope with falling screen prices during a traditionally strong demand season.

LG Display now expects third-quarter shipments to rise by only a mid-teen percentage compared to its previous forecast for low-twenties percentage growth, while average selling prices are expected to drop by a high-teen percentage instead of the low-teen percentage expected earlier.

The company also said its earnings before interest, tax, depreciation and amortisation (EBITDA) margin would be in the mid-twenties percentage range, from 38 percent in the second quarter.

"The new shipment and EBITDA forecast seem to be slightly more optimistic than market expectations, while the price forecast seems to be in line," said Jay Yoo, an analyst at Korea Investment & Securities.

Yoo expects the current LCD market downturn to last for several more months, with LCD makers' results hitting bottom during the first half of 2009 and a recovery unlikely before the middle of that year.

Last week, LG Display said it would keep its panel output at 90 percent of normal. It had initially planned to resume full production in September, after cutting output by 10 percent in late July.

After reaping hefty profits in the first half, LCD makers are suffering from a fast-spreading global downturn that is hitting consumer demand.

Citigroup last week lowered its target price on LG Display by nearly a third to 37,000 won, forecasting LG's third-quarter operating profit would drop 81 percent from the second quarter. [ID:nSEO151907]

Ahead of LG Display's announcement, its shares ended 5.0 percent higher at 28,400 won, outperforming a 0.7 percent gain in the wider market .

With a market share of 20 percent in April-June, LG Display is the world's No.2 maker of large-sized LCD panels, competing with top-ranked Samsung Electronics Co Ltd (005930.KS) and third-biggest AU Optronics Corp (2409.TW), according to data from DisplaySearch.

Last month, market research firm iSuppli predicted the large-sized LCD market is set for recovery in September. (Additional reporting by Park Ju-min and Kiyoshi Takenaka) (Editing by Anshuman Daga)