Seoul, Korea – LG.Philips LCD reported a wider operating loss and net loss for the third quarter ended September 30 due to price declines.
The operating loss in the third quarter was $404 million compared to an operating loss of $393 million in the second quarter of 2006, and an operating profit of $254 million in the third quarter of 2005.
Net income in the third quarter of 2006 was a loss of $339 million compared to a loss of $340 million in the second quarter and a profit of $240 million in the third quarter of 2005.
Sales in the third quarter increased to $2.93 billion, a 1 percent increase from $2.89 billion during the same quarter last year.
“During the third quarter, our business did not perform at the level we expected, primarily due to higher than anticipated price declines mainly for LCD TVs. As such, the company continues to take the necessary steps to correct the issues that have limited our progress in recent quarters. Our ability to effectively reduce costs and improve efficiencies will be crucial in restoring profitability as we prepare for what we believe will be a difficult first half of 2007. We have made some inroads in these areas, and will take more substantial steps going forward,” said Bon Joon Koo, CEO of LG.Philips LCD.
Koo added, “As part of our ongoing efforts to restore value for our shareholders, we have initiated a number of actions to improve customer alignment and ensure that our operations support their future needs. Toshiba's equity participation in our new Poland module plant and our focus on Gen 5.5 to accommodate increasing demand for large and wide format notebooks and high-end monitors, are two such examples.” (See related story on www.TWICE.com.)
During the third quarter TFT-LCD panels for TVs, desktop monitors, notebook computers and other applications accounted for 48, 26, 21 and 5 percent respectively, on a revenue basis in the third quarter of 2006, the same level as the second quarter.
Overall, the Company shipped a total of 2 million square meters of net display area in the third quarter of 2006, a 34 percent increase quarter-on-quarter, with an average selling price per square meter of $1,430. This represents a decrease in the average selling price per square meter of net display area of approximately 3 percent compared to the end of the second quarter of 2006 and an average decrease of 11 percent from the second quarter of 2006.
The total cost of goods sold increased 19 percent quarter-on-quarter to $3.19 billion and increased 28 percent year-on-year, primarily as a result of increased shipments. The cost of goods sold per square meter of net display area shipped was $1,585) for the third quarter of 2006, down 11 percent from the second quarter of 2006.
Ron Wirahadiraksa, CFO of LG.Philips LCD commented, “We are now at a crucial inflection point. Without additional measures relating to product mix, cost, and productivity, we will not be able to deliver value to our shareholders. In the coming months, LG.Philips LCD will take the required actions in these areas to better respond to a new reality on pricing, demand and competitive pressures. We are confident that we have at least taken the right first steps - maintaining healthier inventory levels, reducing costs at an expedited rate in Q3, and aligning ourselves in a more substantial way with our customers — and management remains committed to do what is necessary to generate acceptable returns.”
He added, “For the fourth quarter we anticipate continued growth and an increase in area shipments by a mid-twenties percentage quarter-on-quarter. We expect our average selling price per square meter at the end of the fourth quarter of 2006 to decline by a low single digit percentage, largely due to the continued decline in TV prices.”