By Joyce Lee and Heekyong Yang
SEOUL (Reuters) – South Korean display panel maker LG Display (NYSE:) said it planned to cut costs in the first half of this year after posting a record quarterly loss, as global demand for smartphones, computers and televisions remains depressed.
The Apple Inc (NASDAQ:) supplier flagged a turnaround in the second half, pledging cost-cutting and inventory management until demand for its screens recovers later in the year.
With the economic outlook uncertain, purchases of screens fell short of sales of tech devices as clients used up their inventories in the December quarter, a trend which is expected to continue in the first half, LG Display said.
“We engaged in intense production adjustment in the fourth quarter,” Kim Sung-hyun, CFO of LG Display said in an earnings call. “We expect to reduce costs by about 1 trillion won in the first quarter by reducing inventory and other activities.”
To cut costs, the company stopped production of competition-heavy liquid-crystal display (LCD) TV panels in South Korea by end-2022 and reduced LCD TV panel production in China to 50% of capacity this month. It is also adjusting factory utilisation rates for its flagship OLED panels for TVs.
It flagged investments of only about 3 trillion won this year, compared to 5.2 trillion won in 2022, and said it will conservatively maintain existing production.
Shares in LG Display reversed early losses, jumping 4.1% in afternoon trade versus a 1% rise in the wider market.
LG Display said it plans to boost its made-to-order business to increase stability in the face of uncertain market conditions, from 30% of sales currently to 50% of sales by 2024, including a client-ordered new smartphone panel production scheduled to be mass-produced starting second half of this year.
LG Display posted a 876 billion won ($711 million) operating loss for the October-December quarter, compared with a profit of 476 billion won in the same period a year earlier.
It missed an average forecast of a 797 billion won loss from 10 analysts polled by Refinitiv SmartEstimate, weighted toward analysts that are more consistently accurate.
A continuous decline in mid-sized panel prices and efforts to control inventory and reduce factory operations caused the loss, LG Display said.
Revenue fell 17% to 7.3 trillion won.
The company accounted for its large-sized OLED panel business as a separate unit during fourth quarter, which was reflected as an 1.3 trillion won asset loss, leading to a quarterly net loss of 2.1 trillion won.
($1 = 1,231.8400 won)