LG.Philips LCD Co., the world's second-largest manufacturer of flat panels, on Tuesday reported a record loss in the second quarter due to sharp price cuts, but predicted increased demand would help cut losses in the next three months.
In the April-June period, the company's net loss amounted to 322 billion won (US$340.1 million), compared to a profit of 41 billion won a year earlier, the company said in a regulatory filing.
Sales edged up 0.3 percent to 2.32 trillion won, while operating losses came to 372 billion won, a reversal from its operating profit of 29 billion won posted during the same period last year.
Shares of LG.Philips closed up 2.58 percent at 31,800 won on Seoul's main bourse. The results were unveiled after the stock market closed. LG.Philips is a joint venture formed in 1999 between LG Electronics Inc. of South Korea and Philips Electronics of the Netherlands.
The company's bottom line in the second quarter was much worse than the market consensus of 184 billion won, according to FnGuide, a local financial information service provider. The panel maker attributed its poor business performance to sharp price cuts, with panels dropping more than 20 percent this year.
"Due to such panel price cuts, the liquid crystal display (LCD) market had a tough time during the second quarter," Koo Bon-joon, vice chairman of LG.Philips, said in a statement. For the quarters to come, however, Chief Financial Officer Ron Wirahadiraksa painted a less bleak outlook, boosted by increased seasonal demand for LCDs and stabilized panel prices.
He also predicted that shipments of large LCD panels will grow more than 20 percent in the third quarter compared with three months earlier.
Such optimistic views are echoed by analysts who also see a bright spot in the LCD market down the road.
"It seems that LG.Philips' business hit the bottom in the second quarter. With less inventory on the shelf, stabilized prices and an increase in demand could lead to an improvement in its future business," Chung Jae-yeol, an analyst at Goodmorning Shinhan Securities Co. said.
To prepare for increased demand, LG.Philips plans to expand its investment in next-generation flat panel production lines, its officials said.
The worst business performance by LG.Philips comes amid mounting concerns that panel price cuts and an oversupply of products will lead to an overall slowdown in the market. The company competes with Samsung Electronics Co. for the world's No.
1 status in the LCD market.
"Unlike Samsung Electronics, which does not suffer heavy pressure from inventory since it has a steady demand source from its business partner Sony Corp., LG.Philips has plenty of inventory while suffering pressure from sharp price cuts in past months," Chung said.
Earlier last month, LG.Philips moved to cut production, citing mounting inventory, which prompted concerns that the LCD market could slow down.
Reflecting the current market conditions, LG.Philips said that it will reduce overall facility investments set aside for this year from the previous 4.2 trillion won to 3 trillion won.
Seoul, July 11 (Yonhap News)
LG.Philips LCD posts record loss in Q2 on price cuts |
