LG Display Says Profitability Will Fall on LCD Prices

LG Display Co., the world's second- largest maker of liquid-crystal displays, forecast third-quarter profitability will fall more than analysts estimated on declining panel prices, reported The Bloomberg.

Earnings before interest, taxes, depreciation and amortization will be about 30 percent of sales, Chief Financial Officer James Jeong told investors in Seoul today. That's below the 34 percent median estimate in a Bloomberg survey of 11 analysts and would be the Seoul-based company's lowest margin in five quarters.

Prices of LCDs will probably fall in July and August, Jeong said, citing weaker-than-expected demand. LG Display today raised its capital spending budget for this year by 50 percent, 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 $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 investors' point of view, it's another short-term risk.''

LG Display shares have fallen 31 percent in 2008, compared with a 20 percent decline in the benchmark Kospi index, as concern grew that panel makers will face oversupply this year. Bigger rival Samsung Electronics Co. has gained 3.4 percent in Seoul trading this year.

LG Display reported earlier today that second-quarter net income tripled to 759 billion won ($755 million) as demand for computer screens drove up prices. The LCD maker was expected to report profit of 750.5 billion won, according to the median of 14 analysts' estimates in a Bloomberg survey.

Operating profit, or sales minus the cost of goods sold and administrative expenses, jumped almost sixfold to 889 billion won. Operating profit and revenue missed the median estimates in the Bloomberg survey.

Investments by LCD makers to expand capacity, coupled with weaker demand, may increase concern that the industry will take longer than expected to rebound, according to Citigroup Inc.

``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 last week.

In May, Lehman Brothers said capital spending by LCD makers will increase 64 percent in 2008, higher than its previous projection for 58 percent growth. Supply will exceed demand by 8 percent in 2009, implying ``serious oversupply,'' according to Lehman.