LG Display Co, the second-largest maker of liquid-crystal displays (LCD), reported that second-quarter profit tripled on demand for computer screens, leading the company to boost factory spending plans.
Net income rose to 759 billion won (US$755 million) from 228 billion won a year earlier, the Seoul-based company, which lags behind Samsung Electronics Co in LCD production, said in a regulatory filing yesterday.
Sales, including those of overseas affiliates, climbed 25.5 percent to 4.21 trillion won. Operating profit, or sales minus the cost of goods sold and administrative expenses, jumped almost sixfold to 889 billion won.
Higher demand for computer monitors helped drive up prices and shipments in the second quarter.
LG Display yesterday raised its capital spending budget for this year by 50 percent to 4.5 trillion won, defying concerns by Lehman Brothers Holdings Inc and JPMorgan Chase & Co that the LCD industry is entering a glut which may last until next year.
“Earnings in the third and fourth quarters probably won’t meet market expectations,” said Kim Hyun-wook, who recently sold LG Display shares from the equivalent of US$350 million he manages at KB Asset Management Co in Seoul.
“The company will want to invest more to gear up for a showdown with Samsung, but from the investors’ point of view, it’s another short-term risk,” Kim said.
LG Display shares have fallen 31 percent this year, compared with a 20 percent decline in the benchmark Kospi index, as concern grew that panel makers will face oversupply this year.
Lehman Brothers predicted this week that LCD prices will continue to drop until the first half of next year because of a glut.
Investments by LCD makers to expand capacity, coupled with weaker demand, may increase concern that the industry will take longer than expected to rebound, Citigroup Inc said.
“We remain cautious on 2009 on additional supply side risk from new capacities and growing concerns on the demand side from a global macro slowdown,” Jonathan Rhee, an analyst at Citigroup, wrote in a report published last week.
In May, Lehman Brothers said capital spending by LCD makers will increase 64 percent this year from a year earlier, higher than its previous projection for 58 percent growth.
Supply will exceed demand by 8 percent in next year, implying “serious oversupply,” Lehman said.
LG Display said yesterday it would invest about 1.4 trillion won to build a manufacturing line for monitor and notebook LCDs that is scheduled to start production in the second quarter of next year.
The company will also begin operating a larger so-called eighth-generation plant in the first half of next year.
Demand for LCD TVs has been weaker-than-expected because of the slowing global economy and TV panel prices may fall more than 18 percent in the second half after declining 8 percent in the second quarter, James Kim, an analyst at Lehman Brothers, said in a report this week.
Prices of screens for computer monitors may decline 23 percent from last month until the end of this year, Kim said.
He said that the industry glut began in May, earlier than his previous projection for the end of this year.
LG Display forecast third-quarter LCD prices will fall by about a “low teens” percentage from three months earlier.
LG Display’s shares dropped 6.3 percent to close at 34,350 won in Seoul yesterday before the company reported its second-quarter results.
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