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LG.Philips posts profit, lifts LCD stock

"This should end any discussions as to whether the industry has seen bottom and when the recovery is going to occur. The industry has definitely begun to recover."

Michael Min, Korea Investment & Securities Co analyst

Shares of television and computer screen makers rose in Asia after LG.Philips LCD Co, the world's largest producer of liquid-crystal displays, had a higher-than-expected profit and forecast panel prices will gain.

LG.Philips rose 3.3 percent, its biggest gain in six weeks, to 47,000 won (US$45.2) and Samsung Electronics Co, the second-largest LCD maker, rose 1.5 percent in Seoul.

In Taiwan, AU Optronics Corp (友達光電), the third-largest producer, rose 2.1 percent and No. 4 Chi Mei Optoelectronics Corp (奇美電) climbed 1.8 percent.

As the first LCD maker to report earnings for the latest quarter, LG.Philips reinforced optimism that rising demand for LCD televisions is helping the US$35 billion industry rebound from a glut that drove the company into its first loss in two years during the first quarter. Samsung, which is also the world's second-largest semiconductor maker, reports results July 15.

"This should end any discussions as to whether the industry has seen bottom and when the recovery is going to occur," said Michael Min, an analyst at Korea Investment & Securities Co in Seoul. "The industry has definitely begun to recover."

Easing oversupply helped LG.Philips yesterday post second-quarter net income of 41 billion won (US$3.9 million), beating the 1.5 billion won median estimate of eight analysts surveyed.

Operating profit, excluding earnings generated from overseas assembly plants, fell 96 percent to 28 billion won, compared with the 18 billion won projected, according to the survey.

Sales fell 11 percent, in line with projections.

`Tight' Supply

Average panel prices, which fell 1.1 percent from the first quarter, will probably rise by a "single-digit" percentage by the end of September from the end of June, LG.Philips said, without elaborating. Third-quarter shipments will rise about 15 percent from the second quarter, it said.

Prices for LCDs used in notebook computers, which rose in June, will continue climbing until September, Austin, Texas-based researcher DisplaySearch said in a June 30 report. Prices of computer monitors and TV panels will probably increase until August, it said.

The American depositary receipts of LG.Philips yesterday rose 4.9 percent to US$22.75, their biggest gain in two-and-a-half months.

LG.Philips, controlled by South Korea's LG Electronics Inc and Royal Philips Electronics NV of the Netherlands, said it saw a balance between supply and demand in the second quarter, after forecasting in April there would be a glut in the three-month period.

The company said it expects supply to be "tight" in the third quarter.

Spending More

LG.Philips and other makers of LCD panels used in Dell Inc computer monitors and Sony Corp televisions are counting on demand before the new school year and Christmas season to boost earnings growth.

Rising demand, spurred by consumers replacing bulkier glass tubes with slimmer LCDs, is prompting LG.Philips to boost capital spending 20 percent to 4.6 trillion won this year, while Samsung plans to increase LCD spending 68 percent to 2.9 trillion won.

LG.Philips said last week it plans to raise US$1.2 billion selling shares in the third quarter to fund expansion.

AU Optronics may report earnings on Aug. 3 and Chi Mei on July 29, according to their Web sites. Japan's Sharp Corp, the world's top LCD TV vendor, is scheduled to report on July 27.
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