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LG.Philips Post Q2 Profit, Double-Digit Sales Gains

7/10/2007 09:29:00 AM Eastern

Seoul, South Korea — LG.Philips LCD reported a net profit in the second quarter along with a double-digit sales gain.

Sales in the second quarter of 2007, ended June 30, increased by 23 percent to $3.64 billion an increase of 45 percent from $2.51 billion in the second quarter of last year.

Net income in the second quarter was $247 million compared with a loss of $349 million in the second quarter of 2006. Operating profit in the second quarter of 2007 was $163 million compared with an operating loss of $403 million in the second quarter of 2006.

LG.Philips LCD’s EBITDA in the second quarter was $921 million, an increase of 250 percent from $263 million in the second quarter of last year.

Young Soo Kwon, CEO of LG.Philips LCD, said, “Our second quarter’s performance was better than expected, which underscored a faster than anticipated turnaround. This was driven in large part by the successful implementation of our strategies aimed at reducing costs, sustaining a disciplined CAPEX strategy, maintaining healthy inventory levels and developing plans for capacity expansion, especially at P7.”

He added, “Overall, we benefited from the market’s more rational production and pricing levels and believe LG.Philips LCD is well positioned for continued performance improvement in the second half of 2007.”

Kwon continued, “In the second quarter, enhanced customer collaboration and overall strong market demand were the primary drivers of improved shipment levels in the monitor and notebook segments. We were pleased to see that shipments for the TV segment also increased in the second quarter, with ASP declines stabilizing to levels better than those projected in previous guidance. Innovative cost reduction initiatives resulted in the sequential decrease in cost of goods sold per square meter of 12 percent and we are well on our way to achieving around 30 percent in cost reductions for 2007.”

Kwon noted that the company’s objective to balance the goal of maximizing output capacity through improving input capacity “and production excellence was critical in the decision to cancel the investment in Gen 5.5 equipment. Instead, we are focusing on ways to maximize capacity at existing production lines and are studying investment in Gen 8 equipment, targeting ramp up in the first half of 2009 in the already constructed building. The second quarter’s performance demonstrates that we are moving in the right direction.”

Revenue for the three-month period ended June 30, increased by 45 percent to $3.64 billion from $2.51 billion for the corresponding period of 2006. TFT-LCD panels for TVs, monitors, notebook PCs and other applications accounted for 47 percent, 27 percent, 21 percent and 5 percent, respectively, on a revenue basis in the second quarter of 2007.

Overall, the company shipped a total of 2.8 million square meters of net display area in the second quarter of 2007, a 26 percent increase quarter-on-quarter. The average selling price per square meter of net display shipped was $1,274, which was a decrease of about 1 percent compared with the average of the first quarter of 2007. The ending average selling price per square meter was $1,314, an increase of about 5 percent compared with the end of the first quarter of 2007.

Capital expenditures in the second quarter were $555 million compared with $1.073 billion in the second quarter of 2006, and were largely for P7. Total production input capacity on an area basis increased approximately 12 percent sequentially in the second quarter and was largely due to increase of production, mainly in P7.

Ron Wirahadiraksa, chief financial officer of LG.Philips LCD, commented on the third quarter and beyond. “Looking ahead, we expect shipments in the third quarter of 2007 to increase by a mid-teens percentage with an average ASP increase of a low-single digit percentage and a flat quarter ending ASP. We expect shipments in the TV segment to increase by a high-twenties percentage with an average ASP decline of a low-single digit percentage and a quarter ending ASP decline of a mid-single-digit percentage.”

He added, “We expect to ramp up P7 beyond its initial design input capacity of 110,000 input sheets per month, expecting around 130,000 sheets on average in the third quarter, to better prepare us for the anticipated demand increase in the second half of the year.”

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