LG Display Co., Ltd. (LPL) Q1 2026 Earnings Report, Transcript and Summary

[Interpreted] Good morning and good evening. Thank you all for joining the conference call for the LG Display earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on LG Display's First Quarter of Fiscal Year 2026 earnings results.

[Interpreted] Good afternoon. This is Kim Joo Dong, Vice President, in charge of Finance and Risk Management Division at LG Display. Thank you for joining our first quarter 2026 earnings conference call. Joining us today are CFO, Kim Sung-Hyun; Vice President, [ Cho Seung Hyun ] in charge of Business Control and Management; Vice President, [ Kyong Jeong Deuk ], in charge of Large Display Planning and Management; [ Hong-jae Shin ] and Ahn Yu-Shin, in charge of Medium Display Planning and Management; Vice President, [ Paek Seung-yong ], in charge of Small Display Planning and Management, Vice President, [ Sang Keuk Kwon ] in charge of Auto Marketing and [ Kim Kyu-dong ], Leader of the Business Intelligence team. Today's conference call will be conducted in both Korean and English. For detailed performance-related materials, please refer to our disclosure or the Investor Relations section in the company website. Please refer to the disclaimer before we begin the presentation. Please be informed that the financial figures presented in today's earnings release are consolidated figures prepared in accordance with International Financial Reporting Standards. These figures have not yet been audited by an external auditor and are provided for the convenience of our investors. I will now report on the company's business performance in Q1 2026. Revenue in Q1 was KRW 5.534 trillion, down 9% year-over-year and 23% quarter-on-quarter on the back of stable OLED product shipment and favorable exchange rate and despite such external factors as the seasonality and the base effect coming from the discontinuation of the LCD TV business in Q1 last year. Operating profit was KRW 146.7 billion, rising Y-o-Y, driven by strengthened business structure and sustained OLED performance. Operating profit margin was 3%, and EBITDA margin was 21%. Net income recorded a loss of KRW 575.7 billion due to the impact of FX translation loss on foreign currency debt as the high exchange rate persisted. Next is area shipment and ASP trends. Area shipment in Q1 was 3.2 million square meters, down 21% Q-o-Q. On top of the seasonality, there was continued push by the company to streamline low-margin models, primarily in the midsized product line. As for ASP per square meter, it fell 4% Q-o-Q due to the seasonal decline in small panel products with relatively high price per square meter. But at $1,244 it was up 55% Y-o-Y, thanks to the rising share of OLED as a result from the company's business structure upgrade efforts. Next, I will discuss the revenue breakdown by product category. TV was 16% and IT 37%. Mobile and Others segment accounted for 37%, down 3 percentage points Q-o-Q as the market entered into seasonality. Auto, which is relatively less season sensitive, took up 10%, up 3 percentage points Q-o-Q. The OLED product group accounted for 60% of total revenue, up 5 percentage points Y-o-Y. We believe that through our persistent internal push to enhance our business structure and shift to an OLED-centric company, we have established a structure that can generate meaningful performance despite unfavorable externality. Next is financial position and key metrics. Cash and cash equivalents in Q1 was KRW 1.525 trillion, largely unchanged Q-o-Q. Of the main financial ratios, current ratio was 74%, almost flat Q-o-Q with debt-to-equity ratio at 251% and the net debt-to-equity ratio at 157%. While there have been temporary fluctuations quarter-on-quarter due to adjustment in our borrowing portfolio and the impact of exchange rates, we plan to further strengthen our financial soundness in the long term. Next is guidance for Q2. Total area is expected to grow by low 10% level Q-o-Q, driven by shipment increase, mainly in large-sized panels. As for the price per square meter, it is expected to fall by low to mid-10% due to lower shipments resulting from mobile products seasonality, which typically command higher price per square meter. I will now turn the call over to our CFO, Senior Vice President, Kim Sung-Hyun.

[Interpreted] Good morning and afternoon. This is the CFO, Kim Sung-Hyun. Thank you for joining us at this conference call. Despite the seasonality in Q1, we were able to remain profitable for 3 months in a row, thanks to our years-long internal efforts such as initiatives to transition to a business structure based on OLED and high-end strategic customers as well as the innovation of cost and improvement of operational efficiency. Furthermore, we have significantly enhanced business stability and competitiveness by increasing the share of OLED out of total revenue to 60%, a 5 percentage point increase Y-o-Y. The clearly improved business fundamentals will serve as the solid foothold for a sustainable profit-generating structure that the company aspires for and will be the driving force behind our continued improvement in business performance. We will keep working to ensure stable OLED-centered product shipments and the expansion of business performance. But looking at the external environment, uncertainties today are higher than ever before. The scope and scale of these uncertainties continue to grow, including not only rising semiconductor prices, but also declining global demand, rising energy costs and supply chain disruptions, making it difficult to estimate their full impact at this point. Accordingly, we believe that close monitoring of the external volatility and uncertainties, along with the ability to respond swiftly are essential capabilities that the company must possess and that the situation requires more cautious approach. Meanwhile, even as external uncertainties persist, it is highly positive that our competitiveness in high-spec products, which is our strength, is increasing and that technological barriers are rising along with it. Even as we seek optimal response to external uncertainties, we will strive to secure financial soundness and achieve sustainable results that meet the expectations of the market and our customers based on a company-wide effort to strengthen our technological differentiation. Next, allow me to briefly outline our plans and strategies by business segment. In the small-sized mobile business, we will flexibly respond to our customers' diverse technical needs based on our technological leadership and reliable supply capabilities. We will also efficiently utilize our existing production infrastructure to ensure seamless preparation for the future. In the midsized business, we plan to continue improving profitability by focusing on high value-added products, actively responding to customer demand with our differentiated competitiveness in tandem OLED and high-end LCD technology. We also intend to keep improving our product portfolio with a focus on profitability to further enhance production efficiency. In large panel business, we plan to strengthen our premium product lineup based on our white OLED technology while also expanding our range of price competitive products. And in monitor business, where the shift to OLED is accelerating rapidly, we intend to grow our OLED business and focus on acquiring customers by expanding our gaming product lineup, which incorporates our proprietary technology. And in auto, where competition is increasingly fierce, we will keep solidifying our market position based on our differentiated product and technology portfolio. Finally, a few words on our investment. We maintain the principle of allocating CapEx primarily towards essential current investment and future-proof technology investment. The investment disclosed last afternoon in new OLED technology infrastructure was also decided in this context. We plan to strengthen our technological competitiveness and growth foundation by continuing to upgrade our OLED technology as a way to respond to future market trends and customers' demand. At the same time, our work to optimize investment efficiency will continue unchanged. CapEx in 2026 is expected at around KRW 2 trillion. We will continue to build up a decision-making framework that enables a prudent yet flexible response by finding the right balance between preparing for future growth and ensuring financial soundness. This concludes our presentation of business highlights for Q1 2026. We will now take your questions. Operator, please commence the Q&A session.

[Operator Instructions] [Interpreted] The first question will be provided by Gang Ho Park from Daishin Securities.

[Interpreted] Thank you for taking my question, which is on the disclosure of new investment that was made yesterday. So the disclosure was for about KRW 1.1 trillion in OLED. And so my question is, can the company provide more details about this disclosure? And recent media reports have mentioned that another company is exclusively supplying into foldable products. Is the disclosed investment for new -- is it for new form factors to counter this? And if that is the case, then what is LGD's business strategy regarding foldable smartphones and its market entry?

[Interpreted] This is the CFO. Allow me to respond to your first question. Now as everyone would know, in the industry, we see that the technological development is really accelerating at a remarkable pace. And the importance of technology is also translating into the competitiveness of companies. So all the companies are now struggling and really competing against each other to secure the competitiveness. Now as has been reiterated several times, the company is focused on the OLED business. Accordingly, the more ready we are with new OLED technologies and the more technologically competitive we are, then there will be more business opportunities coming our way, and we will be able to maintain our competitiveness across the industry. And yes, the company has disclosed -- made disclosure about new facility investment within this context. And as for the specifics, I would love to share more of them, but then given the fact that our new technology directly translates into new technologies for our customers, please understand that I am not in the position to discuss them further.

[Interpreted] This is [ Paek Seung-yong ] in charge of Small Display Planning and Management and allow me to respond to the question about the foldables. Our position and perspective on foldable devices remain unchanged. Foldables offer consumers differentiated value through a new form factor, and there are growing market expectations that they will be the new growth driver. But until we gain visibility into market size, pace of growth and our own opportunities, our strategy will be to grow performance by maximizing production and sales of existing products. If clear opportunities are identified in the smartphone sector, we will prepare a supply system after carefully reviewing such factors as market acceptance of differentiated products and growth rate, and we will then try to build on our mass production experience in midsized foldable devices to expand new business opportunities in the smartphone sector.

[Interpreted] The following question will be presented by Jimmy Yoon from UBS Securities.

[Interpreted] My question is regarding the overall panel business. Today, we see that the memory shortage is driving up memory prices and oil price is also surging following the Middle East conflict. Such mounting uncertainties may trigger more concerns regarding potential production disruptions in the tech value chain, shifts in demand, rising cost and price pressure from customers. What is the expected impact on demand? And what will be the company's response?

[Interpreted] This is [ Cho Seung Hyun ] in charge of business control and management. Now it is true that the market today is facing growing uncertainties stemming from the memory shortage and the impact of the geopolitical conflict. But I believe that we have to look at the first half and the second half of the year separately. Now in the first half, we are seeing some pull in demand due to concerns over memory supply. And with the scheduled major sporting events coming around, there is expected to be some positive impact. Now going into the second half of the year, considering factors such as component price hikes, set price changes and macro uncertainties coming from the Middle Eastern situation, we will have to be more cautious in our approach to market changes. While external uncertainties are increasing across the market, the impact varies slightly by company depending on their customer and product structure. The impact of rising chip prices is more pronounced in the mid- to low-end product segments, meaning that the impact on global customers with relatively strong SCM competitiveness is likely to be quite limited. It might even be an opportunity for them. So against the risk of growing volatility, we will closely monitor changes in demand and trends in component supply and demand. We will collaborate with customers and focus more on cost innovation drawing from our global customer portfolio and established high-end product lineup and successfully navigate these challenging market conditions.

[Interpreted] The following question will be presented by Jung Hoon Chang from Samsung Securities.

[Interpreted] My question is similar with some of the previous questions. There has been some uncertainties in the business, as the CFO has mentioned, with the pronounced effect of the U.S. and Iran conflict, especially on the rise on the commodity prices. So, so far, there was some discussion about the midsized and small-sized businesses. But then for the large panel business as well, then what will be the company's operational strategy as well as the growth strategy for the future? If you could provide us with an update, what's helpful.

[Interpreted] This is [ Kyong Jeong Deuk ] in charge of large display planning and management. For our large panel business, amid industry volatility this year such as rising prices of commodity as well as the components like semiconductors, we plan to establish a stable revenue structure and strengthen our fundamentals by enhancing our high-end OLED TV lineup with leading global set makers and also by expanding our mid- to low-end OLED TV lineup. And for the OLED monitor segment, the high-end gaming monitor market is very rapidly shifting from LCD to OLED. And we -- and the share out of our total shipment is likely to grow very significantly from low teen percent last year to around 20% this year. So our product and customer strategy will be about maximizing our business performance and opportunities through an optimized production share between TVs and monitors and to keep solidifying our market leadership.

[Interpreted] The following question will be presented by Won Suk Chung from iM Securities.

[Interpreted] Now I also have 2 brief questions. Now we have been discussing uncertainties a number of times so far. But now yes, as the uncertainties continue, I believe that perhaps cutting losses from the IT business has made a significant contribution to the company improving profitability Y-o-Y and also for the year. Then as the uncertainties continue, then when does the company believe that you will be able to turn around to profitability? And also looking at the OLED new investment disclosure yesterday, it seems as if the company is also increasing OLED investment into new technologies. Now given the fact that the other companies are also looking into the investment for the 8-gen IT OLED and so forth. So what is the company's plan for investment down the road?

[Interpreted] This is Ahn Yu-Shin, in charge of Medium Display Planning and Management. Now the ongoing uncertainties in the external environment, including the U.S.-Iran conflict makes it difficult to expect a recovery in the IT sector this year. To prepare for increased demand volatility in the second half due to rising commodity prices and prices of components like semiconductors, we are securing supply flexibility and closely monitoring the situation. Although sales and shipment volumes decreased Y-o-Y in the first quarter, profitability improved thanks to internal initiatives like strengthening our product mix. For the year, we will focus on high-end differentiated products based on long-established customer trust, technological competency and responsiveness and further upgrade our high-end focused customer structure and maximize opportunities with a select and focused approach tailored to customer demand, which will keep up our trend of improving profitability. And regarding IT OLED, as the transition from LCD to OLED accelerates, starting with tablets and extending to monitors, we are aware of the growing interest in the market as well. IT products have a diverse customer base and product specifications and having sufficient demand to keep the fab running is crucial. To do that, we need to meet consumer needs for technological capabilities and price competitiveness as well. As the period of uncertainty and high volatility in demand continues, we intend to proceed cautiously until there is clearer demand visibility for OLED in the downstream. Until we have enough visibility to make investment decisions, we plan to utilize our existing infrastructure as efficiently as possible. We are actively exploring various strategies to prepare for future opportunities, and we will be ready to respond in a timely manner when the market begins to fully take off. We will take one last question.

[Interpreted] The last question will be presented by HyeonWoo Park from Shinhan Investment & Securities.

[Interpreted] The company is reportedly implementing voluntary retirement this year again following last year. So what is the expected scale of this adjustment? And when will this be reflected? Will there be more of this type of workforce adjustment and onetime cost in the future?

[Interpreted] Yes. So as have been reported in the media, there is going to be another round of workforce adjustment this year. And this is part of the company's effort and transition to an OLED-centric company. So along with this, we have been upgrading our business structure and improving our product portfolio and strengthening our cost structure and also undertaking cost innovation. Now we are aware of the sense of fatigue that the shareholders might be feeling as the similar event continues to repeat itself. And for the short term, yes, this will be something that will incur cost to the company, and this is the kind of decision that requires very cautious approach as well. But we also see this as a necessary process for the company to remain sustainable, and we have made this decision from a long-term perspective. And as this is an internal company process, the specific terms cannot be disclosed for which I ask for understanding. But then there have been some fairly detailed reporting by the media as well. But again, the program is still ongoing. It's not been concluded yet. So as for the specific overall cost or the scale, it is too early to tell. Now yes, it is true that having the repeated implementation of the voluntary retirement by no means is desirable for the company either. But if it does have to happen, then it better happen within a short period of time so that the sense of stability will be restored among our members. And that is why we have -- we are offering a much strengthened package this time around. And this is part of the company's plan to make sure that this does not have to happen again in the near future. Now the second quarter for the company historically has been a period of poor financial performance. Now of course, we have undertaken some business restructuring, business realignment and also cost innovation efforts. And as a result of the series of efforts, we were planning and expecting profitability in the second quarter of this year. And that is how the business was managed as well for at least 1 month. So we were expecting to see profit in the second quarter. And despite that, of course, we continue to try to become a better company, a more sustainable company for the longer term. So on that note, I would also like to ask for a more positive view from the shareholders and investors as well.

[Interpreted] This concludes LG Display's Q1 2026 Earnings Conference Call. We thank everyone for joining us today. Should you have any additional questions, please contact the IR team. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]