Heeyeon Kim - Head of IR Department Matthew Kim (ph) - Head of TV Marketing.

Nicolas Gaudois - UBS Brian White - Cantor Fitzgerald Andrew Abrams - JG Capital Jeffrey Toder - CIMB Mark Tun - Mitsibushi UFJ Morgan Stanley Clare Kim - Hyundai Securities.

Good morning and good evening. First of all, thank you all for joining this conference call and now we’ll began the conference of the fiscal year 2014, first quarter earnings results by LG Display. This conference will start with a presentation followed by a division of Q&A session. (Operator Instructions).

Now we shall commence the presentation on the fiscal year 2014, first quarter earnings results by LG Display..

Welcome to LG Display, first quarter year 2014 conference call. My name is Heeyeon Kim, Head of IR Department. I would like to welcome everyone to our quarterly earnings conference call. I am joined by our IR staff, as well as representatives from TV and Market Intelligence.

Matthew Kim (ph) is the Head of TV Marketing and (Inaudible) Head of Market Intelligence Department. Next slide please. Before we move on to the earnings results, please take a minute to read the disclaimer. I would like to remind everyone that results are based on consolidated K-IFRS accounting standards and are un-audited. Next slide please.

This conference call will take about an hour. Before we go into the Q-&-A session, please allow me to highlight our first quarter results performance and second quarter outlook. Moving on to revenue and profits on the next slide. Shipment and price came out in line with our original guidance.

With the weak seasonal demand, the area panel shipment decreased by 13% quarter-on-quarter. We have a weakening ongoing price decline in the beginning part of Q1, but the degree of price decline moderated and ended with over stabilized pricing at the end of Q1.

Due to the addition and ASP change in the first quarter, we recorded a quarterly revenue of KRW 5.6 trillion down 21% quarter-on-quarter. Despite of the shipment decline we managed to result in an operating profit on KRW 94 billion by improving product mix with the other side of panel shipment and actively reducing cost with utmost efforts.

Operating margin was 2% and EBITDA margin stood at 18%. Pretax profit was KRW 29 billion and net loss was KRW 82 billion. Net income was greatly reduced due to the adjustment of the differed tax asset. In conjunction with yearly investments, investment tax credit occurs and are accounting as a differed tax asset.

This year the minimum tax rate has risen from 16% to 17% and according to the rate change that 1% adjustment to the remaining differed tax asset has been reflected as one time. For your reference, last year our government raised the minimum tax rate by two percentage points, resulting in about KRW 200 billion EPA adjustment.

Moving on to slide four, looking at our financial positions and ratios. Total asset was KRW 21.6 trillion, liability KRW 10.9 trillion and equity KRW 10.8 trillion. Cash and cash equivalents decreased by KRW 302 billion, resulting in KRW 2 trillion. Inventory recorded on management level at KRW 2.2 trillion.

Looking at our balance sheet, liability to equity ratio recorded 102%. Current ratio was 94%, net debt to equity ratio recorded a 16%, maintaining a stable rate. Morning on to slide five, looking at our cash flow. Cash at the beginning of the last quarter KRW 2.3 trillion.

Cash flow from operating activities, resulting in a cash inflow of KRW 915 billion. Cash flow from investing activities resulted in an outflow of KRW 1.1 trillion and cash flow from financing activities resulting in an outflow of KRW 173 billion.

As a result, the net change in cash was an outflow of KRW 303 billion, resulting in cash recording KRW 2 trillion. Moving on to slide six, I would like to go over our performance and highlights. During Q1 our shipment declined by 13%, resulting in 8.3 million square meters.

ASP on an apples to apples basis fell down by mid single digits percentage quarter-on-quarter and some IT and TV panel prices have been stabilized since the end of the quarter.

But due to relatively steeper shipment decline in smaller sized applications, which has a higher ASP per square meter than the larger panels, our blended ASP per square meter declined by 10% quarter-on-quarter to $628. Moving on to our product mix on slide six.

Our TV business was 41% of our revenues, followed by monitors 20%, mobile 17%, notebook 12%, tablet 10%.

Order applications, except tablet show the increased portion, while the table segment portion declined during Q1, due to the seasonal decline and high base impact from previous quarters as the demand of tablet was highly concentrated in Q4 last year. Moving on to slide eight and looking at our capacity.

Our producible capacity in Q1 declined by 4% quarter-on-quarter to 10.7 million square meters and it was mainly due to the location for R&D activities and LTPS facility convergence. Next, we turn to our outlook section.

For the second quarter we anticipated the shipment to increase by low teens percentages, as set makers are preparing for the new product line up. With a strong demand over to high definition TV and the larger size TV, area growth is expected to increase meaningfully compared to the unit growth.

Considering the overall industry supply demand in inventory situations panel price is anticipated to stabilize across the board with some products expecting larger price increase.

Depending on supply demand situation, we will maintain our utilization rate at a similar level at Q1, in order to provide the area based shipment increase in the second quarter. In terms of profits there are positive potions such as an uplifting issue with the stabilization of panel price.

However, we needed to consider risks in FX trend and the preparation expense of China facility.

As the LCD industry has entered the slow growth phase, we are committed to solidifying our profitability by continually increasing the differentiated products such as OLED TV, ultra high definition TV, IPS monitor, high resolution products based on LTPS and plastic OLED products.

We will continue to drive our cost differentiation as well to overcome the industry difficulties. We are trying to find an optimal balance between future preparation and financial stability. Going forward, we will convert exiting LCD lines for LTPS and OLED production in stages rather than building new fabs in order to maximize our CapEx efficiency.

As we say, we will do our very best to continually to create additional value for our customers and shareholders. Thank you. This is our presentation for Q1 and I would be glad to take your questions. To use the time efficiently, please limit to three questions per person. Operator, please proceed to Q&A session..

(Operator Instructions) The first questions will be provided by Mr. Nicolas Gaudois from Cantor Fitzgerald. Please go ahead sir..

Yes, I haven’t changed firm. I still work at UBS. Good evening. Just the first question I guess in terms of a clarification on capacity overall in Q2. Should we look at the stable capacity or may be a bit of increase driven by the Guangzhou fab in China. My follow-up question will be on the TV panel market near term outlook.

We’ve seen prices increasing for 32 inch and 40 inch as well. Haven’t seen price increasing for the larger sizes, so I wanted to get your insight in terms of the dynamics, which expand the discrepancy.

Perhaps what comes to mind is actually capacity allocation to other sizes including of course 4K being a factor and also potentially some of the restocking of the near-term being smaller sizes, but I will be very keen to get your view on that. Thank you. .

For you question, capacity in the second quarter, we are expecting milder increase for the capacity, because of our (inaudible) loss activity and also we have to reflect that some capacity increases are driven by China facility as well. But the level of capacity increases should be very mild at around low to mid-single digits percentage. .

Right..

Okay, so the demand is high for the TV. First of all the demand side, there is some issue for the increasing of the demand. First of all there’s events of the (inaudible) demand and also the UHD demand is increasing very sharply.

That means that as you know the channel needs some inventory for the pipeline to increase the demand and also the larger size. UHD also is cumulated for the larger size and also the product is very shapely to revenue last quarter, so that means there’s still valuation of the larger size.

That’s why the volume is limited increasing, but area basis is very highly increasing and not delayed. And also there is a supply side. As mentioned by Ms. Kim, the limitation of the new tab, so the supply demand is quite very healthy, at least to the second quarter, but even more there’s a public second help and we checked about the retail sales. .

Okay, thank you very much. .

Next question will be presented by Mr. Brian White from Cantor Fitzgerald. Please go ahead sir. .

Yes, I’m wondering if you can talk about why tablets fell 60% quarter-on-quarter in the March quarter?.

There are several reasons, one is just seasonality as I mentioned. Our Q4 shipment was concentrated in Q4, thanks to the strong seasonality and also second reason is our market share is normalizing nowadays.

As you already understand, the last year our market share in our customer size was very high, but it is expected to normalize, that’s another reason. .

Okay, and when we think about the June quarter, your volume outlook looks fairly strong.

What are the two or three drivers of that strong volume outlook for the June quarter? Was it TV, was is the mobile, tablet coming back, what’s driving that outlook?.

Actually our volume outlook is not as strong, (inaudible) closed. In terms of volume growth, its expected to be mid single digit percentages growth. However, as Matthew commented, biggest size of screen demand, especially for TV it’s highly increasing nowadays.

That makes us to increase our evaluation and growth in the second quarter potentially, while our new shipment growth in only in mid single digits. .

Okay and finally, could you talk a little bit about expectations for 4K TVs as a percentage of your shipment this year and could you talk a little bit about what your seeing in the curved TV market.

Are you starting to ship the curve panel?.

Okay, so right now, our 4K shipment is very softly increasing. So this year we expect it in the high single percentage of the volume.

Also we are ready to do some curved product, but just we are watching, support for our set maker, but we don’t know how that much the impact of the market for the curve TV, so we already prepared the opening, so we have some model, but this is just watching. .

A little difficult to hear you.

Did you start shipping curved or you will start to ship it in the future?.

Might be, third quarter will be shipped..

Thank you..

The next questions will be presented by Mr. Mark Smith from (inaudible) Securities. Please go ahead sir.

Unidentified Participant Well, could you talk about the present yields at your Gen-8 OLED fab and also when yields do hit maturity, do you expect to be able to compete in the mid-tier television market or will you need to be able to eventually print OLED’s..

For yield spike we cannot tell the numbers directly. Fortunately, however older yield trend is in line with our assumption, so that’s why we made a decision to start M2 production in the second half. The second half M2 production will be done based on our original schedule and then your second question please. I don’t understand the meaning.

Unidentified Participant The second question is regarding your WRGB manufacturing method with vapor deposition.

Do you expect to be able to compete in the mid-tier television market or will it remain only a premium television, even when you hit commercial mature yields?.

If my understanding would be correct, our OLED strategy is targeting high end markets instead of mid-end market, but if we are very successful to reduce our cost level to the LCD, given equivalently we can do target within the market finally, but that’s the matter of time.

In all these stages we will target high-end markets and then we will enter each market. Unidentified Participant Okay, thank you very much. .

The following questions will be presented by Mr. Andrew Abrams from JG Capital. Please go ahead sir. .

Hi, a question on cost down.

Can you give a breakdown of your cost down for the first quarter and in terms of materials and production and can you give us an idea of what you think its going to be for second quarter?.

Actually it’s very tough to mention in detail, anyway the biggest reason for our cost reduction comes from the mature cost reduction together with our overhead cost reduction. That’s the main reason for our cost of goods sold, stabilized cost of goods sold despite of our contraction in the first quarter.

And then in case of depreciation expense, it was increased because our depreciation expense increased by about KRW 50 billion in Q1 sequentially..

Right.

So what was the total cost down for the first quarter?.

Yes, our total cost and also the area cost should decrease in first quarter..

Okay, by how much would you have thought it would come down? It’s usually around 2%..

2%? No, it’s much higher than 2%..

Okay, so it’s higher than 2%.

Can you speak a little bit about what you said about converting other facilities to OLED? What the progress is as far as that’s concerned and what the status is of the production facility that you’re now producing OLED TV’s and would you expect to have an OLED smartphone product panel out at some point during this year?.

Your question might be two cases, one is for TV and second is for OLED mobile phone.

And for TV as I mentioned before, our production is in line with our original schedule, so now we are providing a limited volume scale that comes from our first stage OLED facility for TV and then at the end of this year we will provide a second phase production for OLED and to facility.

And to production our early improvements will be a key issue and also as I mentioned before, our early increments paid is in line with our original schedule. So all issues are okay for TV production.

In case of mobile phone we already released OLED flexible mobile phone together with LG electronics, that’s G Flex and then we will extend our product line-ups going forward..

And are those mobile phones done in the same facility that you’re doing TVs or are they in a separate facility?.

Facilities are separate, technology is also separate..

Right, thank you..

The next questions were presented by Mr. Jeffrey Toder from CIMB. Please go ahead sir..

Hi, good evening. First a question on your shipment guidance. You said that your utilization rate would be flat Q-on-Q. Your area shipments are up about low double digits and you said your capacity would be up mid single digits. So there’s another 5% of area growth in there.

Is that coming from the reduction in inventories, which went up a little bit Q-on-Q?.

Yes, that’s correct..

Okay, and just to confirm, your utilization rate was around 90% in the first quarter?.

High 90%..

Excuse me?.

High 90%..

High 90%?.

Yes, like the low 100%..

So it’s around 100, so your full, okay?.

Yes..

Okay. And then my second question is just looking back at the first quarter margin. Obviously things came down quite a lot, but your numbers were better than the street forecast. It was a decline in what we would consider to be higher margin products, tablets and smartphones, but your numbers still exceeded expectations.

Can you talk a little bit about what might have contributed to that?.

Actually our high margin product should come from the bigger screen side, TV and monitors, ironically and in case our mobile and tablet margins was lower than TV and IPS monitors.

Our high margin contributors such as bigger screen TV or high definition 3D TV and together with the IPS monitor, that kind of position increased – contributed for us better margin in Q1. This kind of situation will also be impacted in the second quarter as well..

So that means you expect your margin to be going up in the second quarter?.

We hope so. .

Okay, great. Thank you very much..

The following questions will be presented by Mr. Mark Tun (ph) from Mitsibushi UFJ Morgan Stanley. Please go ahead sir..

Just one question from me today. I’m wanting to find out a little bit more on the downward pressure for your ASP. I see on slide six the ASP has gone down $770 to $628. Could you give us a little bit more of a macro view on maybe a day increased competitiveness of some of the Chinese manufacturers or other reasons for this decrease in ASP.

Just one question from me, thank you..

So 90 day ASP declined 10% in first quarter that mainly comes from the product mix. In case of smaller side, ASP per square meter is much higher than the bigger screen. So if you look at our sales mix in our presentation material, actually smaller size contribution decreased significantly in the first quarter, that’s the main reason.

So 90 day ASP going forward, we believe we don’t expect this kind of sharp decline in terms of 90 day ASP in the second quarter. In second quarter although mixed stock share should be similar, but ASP, apple-to-apple ASP increase in some segment, together with better product mix even in the commodity side.

Is that enough for your question?.

Okay, that was it. Thank you very much..

(Operator Instructions) The next question will be presented by Ms. Claire Kim from Hyundai Securities. Please go ahead ma’am..

Thank you for taking my call Ms. Kim. I have two questions on UHD TV. You have already mentioned that the UHD TV shipment proportion for this year would be high single percent and could you provide the proportion not in terms of shipments, but in terms of area and there will be another follow-up..

Area position is higher than the volume position. Around this is 10% I think, over the 10%..

Thank you.

And my second question is about your price forecast for UHD TV and as far as I know for the last March and April, the UHD TV panel prices are still declining and as you mentioned, your outlook for the blended ASP for Q2 will be very stabilizing, but do you expect that the panel price for UHD TV is still declining for Q2, but it is profitable because of the price premium between UHD TV and (inaudible) HD TV of the same size.

Am I correct?.

Yes..

Yes, you are correct..

(Operator Instructions) The next questions will be presented by Mr. Andrew Abraham from JG Capital. Please go ahead sir..

Thank you. Just a quick follow-up on that last question. If I remember correctly, you were looking for a 30% premium on UHD sets for the current year.

Based on what we’ve seen in terms of price declines, are you still comfortable with that 30% premium for the year or would you expect kind of the overall premium to decline from that 30% to a lower number?.

As you know market prices depends on those market situations. UHD market is as strong and we can keep the panels delivered, but as you know the market is very high and also there’s a premium market. Everybody wanted to compete in that market. So basically it is difficult to get their hands off the premium.

A little bit slowed down, but you can also reduce the cost, so you can feel the margin compared to the UHD..

Thank you..

(Operator Instructions)..

We have one correction for your questions. Actually related to high depreciation of position, if that is expected to be high single digit and in terms of area percentages, it is expected to cross 20% instead of over 10%..

The following questions will be presented by Ms. Christine Han from Arete Research. Please go ahead ma'am..

Hi, thanks for taking my questions. First one is a housekeeping matter. You mentioned depreciation was up by about KRW 50 billion this year or is that the quarter.

Could you, sorry, explain to me again what was driving this and how should we think about it going forward?.

Yes, because of the (inaudible) depreciation expense trend..

Yes, correct.

Why was it up KRW 50 billion this quarter and how should we think about it going forward this year?.

Okay, the first quarter just because of the ATTS conversion. Actually our ATTS just started production.

We have to reflect our depreciation expense in the first quarter and then the trend, going forward the second quarter and third quarter, our depreciation expense declined a bit and then come back to Q4 last year level in Q4 this year, because of our M2 production together with the China facility production.

So all in all our depreciation expense is expected to decline from KRW 3.8 trillion to mid KRW 3 trillion this year..

Okay, thank you.

And my second question is, could you share with us a little bit more color around your CapEx guidance this year? Are you guys remaining the same as what you guided before or has there been any change?.

Our guidance is mid KRW 3 trillion and this is slightly lower than last year. Sorry, sorry, last year our CapEx was KRW 3.5 trillion and this year it’s expected to be similar trend..

Okay, thank you..

(Operator Instructions).

Operator, if there is no question, we will end the conference call now..

Yes, you may..

Yes. On behalf of LG Display, we thank you for participating in our first quarter earnings conference call. Should you have any further questions, please contact either myself or my colleagues. Thank you..