SEOUL (Reuters) - South Korean flat screen maker LG.Philips LCD Co. Ltd. 034220.KS reported on Tuesday a smaller-than-expected quarterly loss as it worked to cut costs, and said it aimed to break even during the current quarter.
Analysts have said the world’s No.2 maker of large-sized liquid crystal displays (LCD) should turn profitable around the third quarter as demand for sleek flat-panel televisions picks up later in the year in the run up to the holiday season.
“After LG.Philips moved to focus resources to cost cuts and supply control from aggressive capacity expansion, prices are showing signs of stabilizing,” said Chung Kyun-sik, chief investment officer at Uris Investment Advisors.
Chief Executive Kwon Young-soo said the industry should see a shortage of TV panels and a rebound in prices of monitor and notebook screens starting in the third quarter.
“We are likely to break even on a monthly basis sometime in the second quarter,” Kwon told an investor meeting. “And the third quarter results will improve sharply from the second’s.”
LG.Philips LPL.N reported a 169 billion won ($181.3 million) net loss in the quarter ended in March, better than a 235 billion won net loss forecast by Reuters Estimates.
The result compares with a 47.5 billion won profit a year earlier and a 174 billion won shortfall in the previous quarter.
Sales on a consolidated basis came at 2.72 trillion won, against 2.47 trillion won in the same period a year earlier and better than the 2.58 trillion forecast.
For more earnings details, see the company’s Web site at:
here Analysts were encouraged by the results.
“LG.Philips will show a recovery from the third quarter this year, considering seasonal factors and market expectations that prices will fall less in the latter half of the year,” said John Park, an analyst at Daishin Securities.
LG.Philips said it expects its panel prices to fall by a mid single digit percent in the second quarter from the first after falling by 9 percent in the January-March quarter.
It also expects its margin on earnings before interest, tax, depreciation and amortization (EBITDA) to be in the low 20s percent in the second quarter, against 19 percent in the first.
It maintained its previously announced capital expenditure plan for this year of around 1 trillion won.
LCD TV MARKET EXPANDING
Helped by lower prices, LCD TVs are increasing their share in the popular 40-inch-and-up TV market, winning a costly battle against the competing plasma display technology.
But LG.Philips, owned jointly by LG Electronics Inc. 066570.KS and Philips NV PHG.AS, needs to further cut costs and widen its client base to continue fighting more profitable rivals and keep up with investment needs, analysts say.
The company aims to cut costs by 25 to 30 percent this year to offset falling panel prices, through increasing outsourcing and cutting component prices. It is also receiving applications this month under a voluntary retirement scheme for office workers, a rare move for a major South Korean company.
LCD shipments in the 40-inch-plus segment are expected to jump 150 percent this year to 15 million units, according to Lehman Brothers.
Rival Samsung Electronics 005930.ks, the world's No. 1 maker of large-sized LCD, is expected to kickstart its "eighth-generation" LCD line in the third quarter, which will boost its control over the large LCD TV market.
Kwon confirmed that Philips was planning to sell an unspecified portion of its 33 percent stake in the joint venture, but said no talks were taking place with Japan's Matsushita Electric Industrial Co. Ltd. 6752.T, which has been rumored to be one of the possible buyers of the stake.
“There’s no rush in finding a strategic partner to replace Philips,” Kwon said.
Before the earnings announcement, shares in LG.Philips, valued at about $13 billion, fell 2 percent to close at 32,400 won, compared with the wider market's .KS11 0.13 percent fall.
The stock climbed 18 percent in the first quarter on the expectations for an earnings recovery, outperforming a 1.3 percent gain in the KOSPI share index.
Additional reporting by Kim So-young and Angela Moon
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