LG.Philips LCD Co, the world's second-largest maker of liquid-crystal displays (LCDs), posted a first-quarter profit that beat analysts' estimates on reduced costs and demand for flat-panel televisions.
Net income was 48 billion won (US$50 million), compared with a 79 billion won loss a year earlier, the Seoul-based company said yesterday in a regulatory filing.
LG.Philips, the first major LCD maker to report earnings for the period, forecast that shipments would jump between 25 percent and 30 percent this quarter from the previous three months as consumers buy LCD TVs because of falling prices and soccer's World Cup in June. Chief executive officer Koo Bon-joon faces pressure on profit margins as Samsung Electronics Co and Taiwan's AU Optronics Corp (友達光電) build more cost-effective plants.
"The industry looks good for the next two to three years," said Kim Hyun-tae, who manages about US$400 million at Landmark Investment Management Co in Seoul. "But it'll be hard to increase the profit margins for the time being."
Sales, including those from overseas affiliates, rose to 2.5 trillion won from 2.1 trillion won, LG.Philips said. Operating profit was 53 billion won, compared with an operating loss of 135 billion won a year earlier.
Second-quarter shipments will be "driven by continued growth in the expanding LCD TV segment" and progress at the company's new production line, said Ron Wirahadiraksa, LG.Philips LCD president and chief financial officer, in the statement.
Margins, using earnings before interest, taxes, depreciation and amortization, were 27 percent in the first quarter and would drop to 20 percent in the second, LG.Philips said.
Lehman Brothers Holdings Inc analyst James Kim estimated in an April 4 report that LG.Philips' second-quarter EBITDA margin would be 24 percent.
Market leader Samsung and Sony Corp said on Monday they would jointly invest US$2 billion to build the industry's biggest flat-panel production line in Tangjeong, South Korea, to expand their partnership. Hsinchu-based AU Optronics, the world's third-largest LCD maker, said last Friday that it would take over Quanta Display Inc (廣輝電子), a move that triggered a decline in shares of LG.Philips and Samsung.
The acquisition may have a negative effect for Samsung and LG.Philips in the near term because increased competition may drive down profit margins, according to Korea Investment & Securities Co analyst Michael Min.
Samsung, which industry researchers say has a market share slightly higher than that of LG.Philips, is scheduled to report on Friday. AU Optronics and Chi Mei Optoelectronics Corp (
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