LG Philips LCD, the world's second largest flat screen maker, reported a fourth straight quarterly loss Tuesday, hit by weaker panel prices amid industry-wide oversupply.
But the results were better than expected and the company said it would aim to break even in the current quarter as lower prices boost demand for large-size liquid crystal display (LCD) TVs and oversupply eases with reduced investment from flat panel makers.
“During the first quarter, our sales performance was encouraging, particularly in the TV and notebook PC segments, as the supply/demand environment improved and pricing began to stabilise,” said Kwon Young-soo, chief executive.
LG Philips – a joint venture between South Korea's LG Electronics and Philips Electronics, the Dutch group – reported a Won169bn net loss for the first three months of this year, compared with a Won48bn profit a year ago. Sales increased 10.2 per cent to Won2,722bn.
Mr Kwon said the industry’s challenges basically remained the same but there were a few positive changes recently such as consumers’ increasing preference for LCD TVs over plasma display panel (PDP) TVs in the 40-inch segment and the industry’s more “conservative and realistic” approach to production and capital spending.
“We expect that going forward these dynamics will bring further strength to the market and are indicative of an industry turnround in the very near future,” he said.
The company forecast shipments in the second quarter to increase by a high teens percentage with an average price decline of a mid-single digit percentage. The average sales price fell 9 per cent in the first quarter and LG Philips’ inventory levels were reduced to about two weeks.
Analysts said the industry’s cycle was nearing bottom and they expect a recovery in the second half, citing declining growth in capital expenditure and easing competition in the 40-inch segment with PDP makers’ move into the 50-inch segment.
“With the industry bottoming just round the corner, we are incrementally confident that the company will post a turnround in the third quarter,” Daniel Kim at Merrill Lynch said in a recent report.
LG Philips has reduced its capital expenditure from Won3,035bn last year to about Won1,000bn this year as it struggles to return to profit.
Given increasing demand and reduced new investments from panel makers, tight supply is expected in the second half, analysts said.