SKorea's LG Philips LCD to post record Q4 earnings on stable prices, cost cuts
South Korean display maker LG Philips LCD is expected to report record quarterly earnings on Monday, helped by stable pricing for its key panels and continued cost cuts, analysts said Friday.
expecting fourth-quarter operating profit of 803.2 billion won on a consolidated basis. That would top its previous record profit of 771 billion won, achieved in the second quarter of 2004.
The company booked operating profit of 693 billion won in the third quarter.
A strong fourth-quarter result would confirm that its recovery in the thin-film-transistor liquid crystal display (TFT-LCD) panel business is in full swing after it suffered steep price erosions early last year, analysts said.
Forecasts peg fourth-quarter revenue at 4.09 trillion won, up from 3.95 trillion won in the third.
LG Philips LCD, a joint venture between LG Electronics Inc and Royal Philips Electronics NV, will release its fourth-quarter earnings on Monday after market close.
The stock gained 13 percent in the fourth quarter while the mainboard KOSPI dropped 2.5 percent.
""Firm pricing which continued well into November, and volume growth in TV panels would appear to contribute to such a result,"" said Yoon Hyuk-Jin, an analyst at Shinyoung Securities.
Fearing further price declines, key panel makers curtailed capital expenditure last year, leading to supply-side constraints and stable pricing, said Yoon.
The price of 15.4-inch notebook panels rose to 108 US dollars in the fourth quarter compared to 105 dollars in the third, according to market research and consulting firm DisplaySearch.
The price of 17-inch monitor panels rose to 136 dollars from 130 dollars.
Prices of 32-inch high-definition TV panels stood at 325 dollars, up from 317 dollars, while those of 42-inch panels fell to 536 dollars from 541 dollars.
Sustained cost cuts with a larger share of cost-efficient models and increased efficiency of production lines were cited by analysts as other factors supporting their rosy forecasts.
The company had targeted cost reduction of about 30 percent for 2007.
The industry has entered a boom cycle which should run well into this year, as tight supply conditions persist amid a rapidly growing global market for flat-screen TVs, according to analysts.
After a traditionally slow first quarter, the remainder of the year should enjoy a boom while renewed capacity buildup plans by key global names could create a supply glut in 2009, they said.
This bullish outlook for the industry is based on projected replacement demand for flat-screen TVs during the Olympic Games in Beijing, as well as the looming suspension of analog TV transmissions in the US.
Given this upbeat forecast, LG Electronics Inc, the country's key consumer electronics maker, is targeting global sales of 14 million TV sets this year, nearly double last year's volume.
""It is difficult to think of possible risk factors for this year. The industry will remain firm in 2008 before easing next year,"" said Chang In-Bum, an analyst at Bookook Securities.
""LG Philips LCD will proceed with additional cost cuts this year, with volume growth curtailing fixed- cost burden, although the pace would not match the previous year's.""
While the possibility of Matsushita buying Philips' stake has been reduced given its tie-up with Canon and HItachi, Citigroup said it does not see this as a negative risk, as the South Korean panel maker is expected to maintain strong earnings growth on the back of its sound fundamentals.