LG.Philips LCD Co slashed its quarterly earnings forecast days after AU Optronics Corp (
Earnings before interest, taxes, depreciation and amortization would be about 10 percent of sales in the second quarter, half the company's previous profit margin estimate, LG.Philips, the world's second-largest liquid-crystal display maker, said yesterday in a regulatory filing. The Seoul-based company also halved its TV shipment growth forecast.
The revision, mirroring comments from AU Optronics last Tuesday, may raise pressure on panel makers to cut prices further after the increase in TV sales spurred by the world's most-watched sporting event failed to live up to companies' expectations.
Eroding profit margins may lead to industry consolidation, analysts such as JPMorgan Chase & Co's Bhavin Shah said.
"People are starting to accept that it's not going to be that easy to generate super returns in this sector," Shah, the highest ranked technology analyst in the latest Institutional Investor poll, said before the LG.Philips announcement.
"Some of the second-tier producers may consider giving it up," he said.
Shares of LG.Philips, down 23 percent this year, closed at 33,000 won (US$31), unchanged from the last trading session. The company announced its second-quarter revisions after the market's 3pm close.
LG.Philips said its second-quarter shipments of TV panels will probably rise 25 percent from the preceding three-month period, or half the growth it had projected. Overall shipments would increase about 15 percent, short of an earlier growth forecast for more than 20 percent, it said.
Second-quarter prices would fall about 15 percent from the first quarter, compared with an earlier forecast for a decline of less than 10 percent, the company said.
Inventory increased to about four weeks' worth of stock, more than the company expected, leading LG.Philips to scale back production, CFO Ron Wirahadiraksa said in a statement.
LG.Philips, which has budgeted 4.2 trillion won this year for capital spending, is also reviewing its total production capacity plans for this year and beyond, the statement said.
AU Optronics, the world's third-biggest LCD maker, last week halved its second-quarter TV shipment growth estimate to less than 10 percent. Prices will probably fall about 10 percent, double the pace projected seven weeks earlier, it said.
The company said in April that second-quarter TV shipments would rise 20 percent from the preceding three months, and prices would drop about 5 percent.
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