[Foreign Language] Good morning and good evening. First of all, thank you all for joining this conference call and now, we will begin the conference of the fiscal year 2018 fourth quarter earnings results by LG Display. This conference will start with a presentation followed by a divisional Q&A session.

[Operator Instructions] Now, we shall commence the presentation on the fiscal year 2018 fourth quarter earnings results by LG Display..

[Foreign Language] Good morning. This is Kim Hee Yeon in charge of LG Display's IR. On behalf of the company, let me thank all the participants at this conference call. [Foreign Language] Today, I'm joined by the CFO, D.H.

Seo, Young-Kwon Song in charge of the strategy and marketing group, [indiscernible] in charge of business support, [indiscernible] of IT marketing, Daniel Lee of Market Intelligence, team leader Hyung-Seok Choi of TV marketing and team leader, and team leader [indiscernible] of mobile marketing.

[Foreign Language] Today's conference call will be conducted for one hour in both Korean and English, starting with a presentation on the financial results of Q4 2018 and the company's outlook followed by Q&A. [Foreign Language] Please refer to the IR presentation document in the company's website for more details on the financial results of Q4 2018.

For those joining through the webcast, please refer to the details on the widget on your screen. [Foreign Language] Before we begin the presentation, please take a moment to read the disclaimer.

[Foreign Language] Please note that today's results are based on consolidated K-IFRS standards, prepared for your benefit and have not yet been audited by an outside auditor. [Foreign Language] With that said, we will now start with the presentation on Q4 2018 earnings results. [Foreign Language] First is the financial performance of Q4.

Revenue in Q4 was KRW6.9478 trillion, up 14 percentage points quarter on quarter. Operating income was KRW279.3 billion in the fourth quarter, despite the fall in large product ASP, thanks to growing shipment of IT and medium and small sized products with higher blended area ASP.

[Foreign Language] Operating profit margin was 4% with EBITDA margin up 16%. Income before tax was KRW434.2 billion and net income, KRW152.6 billion. [Foreign Language] Next is area shipment and ASP. [Foreign Language] Area shipment in Q4 was 11.05 million square meters, up 2% quarter on quarter.

ASP was generally in decline, but blended area ASP rose to $559, up 12% QoQ. This is due to change in the product mix with growing shipment of IT and small to medium panels with higher blended area ASP. [Foreign Language] The capacity in Q4 was 13.51 million square meters, unchanged QoQ.

OLED capacity is marked separately from Q4 and it is nearing 10% out of total capacity in the quarter. [Foreign Language] As for the revenue share in Q4, mobile and other applications share was 28%, up 7 percentage points QoQ, thanks to mobile seasonality for small to medium panels and robust shipment in other applications such as auto and wearables.

Notebook and tablet share also rose to 22%, up 2 percentage points QoQ on the back of growing shipment of high value add products and the company's technological competitiveness in IT. This relatively reduced the share of monitors and TV at 14% and 36% respectively. [Foreign Language] Next is the company's financial positions and ratios.

[Foreign Language] Inventory at the end of Q4 was KRW2.6912 trillion, the value rose slightly QoQ with the rise in share of high value add products as inventory in days remains stable. [Foreign Language] As for financial ratios, liabilities to equity ratio and net debt to equity ratio rose slightly due to mid to long term investments.

[Foreign Language] Cash flow at the end of Q4 was KRW2.4434 trillion, down KRW395.2 billion QoQ, due to continued investment in to the company's shift to OLED. [Foreign Language] Next is the company's guidance for 2019 first quarter. [Foreign Language] Area shipment growth in Q1 is expected to fall at a high single digit percentage due to seasonality.

As for blended area ASP, it is expected to fall at a mid to high single digit percentage, reflecting the panel price decline. [Foreign Language] Next, Daniel Lee in charge of market intelligence will report on the supply demand outlook followed by the new CFO..

[Foreign Language] This is Daniel Lee in charge of market intelligence. I will now present the company's outlook on the market dynamics and supply demand. [Foreign Language] For the supply side, the LCD industry in 2019 is again expected to see double digit growth, due to increase in Chinese panel makers' investment, as it did in 2018.

[Foreign Language] On the other hand, there is growing volatility in the demand and market for major display products, including TV, due to such macroeconomic uncertainties as global economic slowdown, US China trade friction and FX risks in emerging economies along with the base effect in developed markets with high growth last year.

[Foreign Language] Amidst the environment, panel price has shown downward trend from Q4 2018. If we consider demand and supply dynamics in theory only, it seems hard to forecast a positive panel price trend in 2019.

[Foreign Language] But in reality, each suppliers' fab operation and differentiation strategy are expected to have a bigger impact on the panel price than supply and demand. Thus, the price movements are likely to be different by product and size..

[Foreign Language] Good morning to the shareholders, investors and analysts from home and abroad. This is LG Display's new CFO, D.H. Seo. I'm very pleased to have the chance to greet everyone through this conference call since taking office December last year.

[Foreign Language] As the new CFO, though I see the weight of projects lying ahead of us, I'm more excited about the new opportunities we can create with the hard work and achievements that LG Display has built up over the last few years. And I am much hopeful of the diversified world of display that we will lead into.

[Foreign Language] I feel a great sense of responsibility as we need to keep broadly preparing for the future with preempted investment, even with oversupply coming from China, while addressing the issues associated with our business shifting process.

I will find the balance between opportunities and risks keep supporting LG Display's transformation into the future. [Foreign Language] As the new CFO, before presenting the company's strategy, I wish to share the story of the bar headed goose, migratory birds that fly over the Himalayas, which is the world's highest mountain.

[Foreign Language] The bar headed geese, also known as Indian geese, migrate to Southeast Asia over the Himalayas to avoid the winter.

Their preparation for this migration is known to be quite remarkable, not only do they fly straight over to Himalayas, instead of growing around at a lower altitude, they go through the painstaking preparation of reducing their body mass.

[Foreign Language] And if the leader of the V formation struggles with the headwind, another goose takes over so that no one will be left behind. [Foreign Language] It is such team work and unity and focus on the goal that are known to make such difficult journey at extreme altitude successful.

[Foreign Language] You're shareholders, investors and analysts, for LG Display, there is also the Himalayas that we must overcome and we will overcome with rigorous preparation and focus on the goal. [Foreign Language] As the CFO, I will focus on the following three tasks. [Foreign Language] First is innovating our business fundamentals.

The OLED revenue share in our business portfolio is expected to reach 30% this year and close to 50% in 2021. We will solidify our leadership in the market with OLED, as its share and importance grow and keep generating new value to our customers. [Foreign Language] We will first focus on differentiation and profitability as our utmost priority.

In the meantime, we will continue working on our core competitiveness in customer, products and costs. [Foreign Language] As for LCD, our approach will be certainly different from the past. We will improve operational efficiency and focus more on profitable areas. [Foreign Language] Second is better efficiency across the enterprise.

[Foreign Language] We will minimize assets and expenses unrelated to business activities to improve profitability in new businesses and minimize mismatch between resource, input and output, all activities of the company will focus on value creation.

[Foreign Language] And through a select and focused approach, we will make sure that resources efficiently flow into areas that create value add. [Foreign Language] In the end, the push to innovate our business fundamentals and operational efficiency will help solidify our financial fundamentals.

[Foreign Language] As you are aware, LG Display's borrowing has increased considerably compared to the past and investment will continue in 2019. High CapEx spending in such difficult circumstances is an inevitable challenge we must accept to prepare for the future.

[Foreign Language] We will do our best to complete our CapEx spending in 2019 to differentiate and transform our business portfolios into a sound structure that allows the company to generate stable profitability, despite fluctuations in the display market. Based on this, we will consolidate our financial structure.

[Foreign Language] You shareholders, investors and analysts, as the bar headed geese reduce their body mass and thoroughly prepare for their tough travel over the Himalayas, LG Display will proactively prepare for the future, while pushing towards organizational innovation and operational efficiency at the same time.

[Foreign Language] It promises to be a challenge, but LG Display will keep striving to be a great company that can thrive in the display industry where opportunities abound along with fierce competition. Thank you..

[Foreign Language] That brings us to the end of earnings presentation for Q4 2018. We will now take questions. Operator, please commence with the Q&A session..

[Foreign Language] [Operator Instructions] [Foreign Language] The first question will be provided by Kim Dongwon from KB Securities..

[Foreign Language] I have two questions and first is about the impact of your competitions, increased investment into the QD OLED and the entry into the market. So what you believe is going to be the impact on your companies of OLED business. And then second question is about the TV market as well as the technology.

So now in the next three years, it seems as if now, because of the Chinese suppliers 10.5 Gen, it seems as if now, they are going to have the 70 to 80 inch ultra large TV with 8K resolution.

And then currently with your 8.5 Gen OLED technology, so do you believe that you will be able to have efficient transition into the mass production for the 8K with the MMG technology and also so basically then how do you intend to improve the efficiency of your production of 70 to 80 inch products for Gen 8..

[Foreign Language] This is Young-Kwon Song of Strategy and Marketing and I would like to answer the first question, which was on the impact coming from the competitions, entry into the QD OLED. [Foreign Language] So that you know that the QD OLED basically is similar technology to the company's white OLED which is self-emitting.

So I believe that if we were having the - if we were the only company with the OLED, then if there is competition coming in with QD OLED technology that I believe that it is good in terms of enlarging the OLED ecosystem and also degrading competition.

[Foreign Language] And the second question I believe was that, given the fact that some suppliers are now - will be producing ultra large size at 10.5 Gen, it will be possible for the company to produce large OLED with 8.5 Gen and with 8K resolution.

[Foreign Language] Now, then before responding to the question about the large size and you first expanded a bit about the 8K, so we have already demonstrated 8K resolution using OLED technology, so at the CES. So, we have already a secured proprietary technology for a producing OLED at 8K.

[Foreign Language] So that means that depending on the customers' needs, we already have the responsiveness to produce 8K resolution using OLED and then now whether we will be able to produce a large OLED at 8.5 Gen instead of 10.5 Gen, well based on our LCD technology, we already have the technological basis to produce large OLED..

[Foreign Language] And this is Kim Hee Yeon in charge of IR. Let me give further explanation. Now for the company, we believe that we move to larger size TV and to the 8K resolution is a given. So for the company, we are making preparations so that we will be able to respond to the trends in a timely manner.

[Foreign Language] And down the road, we believe that the customers' needs on the TV market are going to become even more diverse. So for example, in terms of the largest fabs and also higher resolution, not only that, also the design and better functionality as well as space freedom.

[Foreign Language] So going forward, not only the already launched Wallpaper TV and also the crystal sound OLED and the rollover TV, but we will also try to provide better and more diversified value to the customers by introducing a ultra size 8K as well. [Foreign Language] Next question please..

[Foreign Language] The next question will be provided by [indiscernible]..

[Foreign Language] I have one question and first is about your outlook on the plastic OLED demand.

Then also in terms of the capacity, it seems as if there is going to be a capacity increase in the second half of this year, so what is your plans for the capacity for the year and also what is your outlook on demand supply?.

[Foreign Language] This is Daniel Lee from market intelligence and I believe that your questions were pertaining to the demand and the supply demand dynamics for plastic OLED in 2019. [Foreign Language] First about the demand outlook for plastic OLED.

In 2018, out of the 150 million or so units of smartphones, plastic OLED accounted for about a little over 10% and this year, we predict it to be around 14%. [Foreign Language] And regarding the outlook on supply demand, it is difficult to say for sure at this point.

But then depending on the demand coming from the market as well as the customer needs and our fab operation plans, we will make sure that we have our operation with flexibility accordance to the customers' needs as well as the market demand..

[Foreign Language] Next question please..

[Foreign Language] The following question will be provided by Nicolas Gaudois from UBS..

Good morning and thanks for taking my questions. First of all, you just provided an indication about OLED revenues could be about 30% of total revenue in 2019. So with that, could you clarify a little bit what to be the pace of progression of capacity for both white OLED and for RGB OLED as well for 2019 to basically reach this target.

And secondly, could you update us as well on the latest view for capital spending for 2019 and maybe just for 2020 and how we should expect by the different categories between white OLED, RGB and other? [Foreign Language].

[Foreign Language] This is the CFO speaking. First, the capacity for white OLED, at the product front, currently, it is 70,000 per month and then now in China, in our China front, we are planning to increase this to 60,000 by the third quarter of this year.

So in all, it would be up to 130,000 within the year and then for the plastic OLED, currently, it is 45,000 and then in terms of the additional capacity, we are making the preparation according to the investment planning in the Chinese plant and that would be for an increase of 30,000, but that is not going to be within this year, but we will be making the preparation and perhaps will - that will be done sometime next year.

[Foreign Language] And regarding your second question on CapEx, our plan for CapEx this year is around KRW8 trillion as we had communicated for some time, but then we believe that most of the large scale investments would be completed by this year, so next year, our guidance for CapEx would be KRW4 trillion.

[Foreign Language] And also you asked about the CapEx share between white OLED and plastic OLED and we - the guidance is about 60% for the TV side and 40% for plastic OLED..

[Foreign Language] And to give you further information, the capacity rampup for TV OLED is planned for the plant in China and the mobile plastic OLED, that's in Korea..

[Foreign Language] Next question please..

[Foreign Language] The following question will be provided by [indiscernible]..

[Foreign Language] First of all, thank you very much for taking my question and also I would like to thank you for the good operating income in the Q4, despite the difficult circumstances. My first question goes to the CFO, which is about the cash flow.

So in 2019, your guidance for CapEx is KRW8 trillion, which is similar to last year's level, but then if there is no improvement in EBITDA, including the operating income as well as the depreciation and amortization cost, then I believe that the shortfall for the CapEx would have to come from the outside.

So that is going to be close to KRW2 trillion, so how do you plan to finance for the close to KRW2 trillion from the outside and in such a case, don't you believe that the cost of funding would weigh down on your non-operating side.

So if I can get your answer to the first question, then I will follow up with a second question?.

[Foreign Language] Yes. This is the CFO and yes, I considered there are some concerns outside the company about LG Display's cash flow, so this is a good opportunity for us to clarify the situation.

[Foreign Language] Now, so we have already given the guidance for CapEx in 2019 at KRW8 trillion and the depreciation and amortization would be over KRW4 trillion, which is going to be similar to last year's level, so yes, on one hand, there is the expected depreciation and amortization of KRW4 trillion and then as I'm sure you've already seen through the media reports, we have already secured syndicated loans from China last year at KRW3 trillion and the cash injection will begin this year.

[Foreign Language] So for the investment, which would require the largest amount, which is in China, we already have secured the investment, the investment capital and then for the rest, we already have prepared the financial mechanisms to make up for the shortfall if ever it occurs, so that we will be able to execute it in a timely manner.

So even in the worst case situation, we already have the means to respond to the situation accordingly..

[Foreign Language] And then, so thank you for the explanation.

My second question is about the plastic OLED mass production, so I believe that for the company, the real differentiating point would be how you can utilize the Gen 6 line for the new smartphones, because you already have the knowhow for mass production for plastic OLED that you have already achieved from the OLED TV.

So my question is then for the Gen 6 line for plastic OLED, when do you believe that this will be ready for mass production and when do you believe that you will be able to reach the breakeven point?.

[Foreign Language] Regarding, so this is the CFO speaking. Regarding your question on plastic OLED, because it is also directly related to the customer situation, at this time, I cannot specify the timeline, but what I can tell you is that it would be possible in the near future.

And also in addition, regarding the plastic OLED, we are focusing our development on mobile and TV as well as auto. So particularly with auto, we believe that we will be able to see something meaningful by the end of this year.

[Foreign Language] And regarding your question on when we will be able to reach the breakeven point, because of the various factors at say in the situation today, please understand that it's difficult to pinpoint the timeline..

[Foreign Language] Last question..

[Foreign Language] The last question will be provided by [indiscernible]..

[Foreign Language] I have two questions. First is about your OLED TV shipment guidance for this year. So considering the operation of your Guangzhou plant in China in the second half of this year, last year, it was around 3 million in it.

So for this year, what do you believe is going to be the shipment for OLED TV? And then a second question is, it is already reported through the media that in the fourth quarter, we had received applications for voluntary retirement, so I wonder whether this has been reflected as a one-off event on less cost in addition to the operating income.

So if it has been reflected, then how much?.

[Foreign Language] Regarding your first question about the OLED TV shipment, our plan for this year is 3.8 million units and with that then, the contribution to revenue would be OLED TV would take up to 30% out of the total TV revenue and of course, we have continued with the efforts last year and into this year, but what we see is that our customers are now trying to position themselves in the high end market and of course the company is aligned with our customers, so that we will be able to have a win-win result for both the company and the customers.

[Foreign Language] And regarding your second question about one-off expenses, now, we see that in every fourth quarter, so around December, then there are bound to be one-off expenses or one-off income.

[Foreign Language] And likewise, last year, so in the fourth quarter last year, again, we have seen both the one-off expenses and one-off income and some of them are not enough to re-assess our earnings results.

So in other words, the one-off expenses and one-off income pretty much offset each other and resulting in the operating income that we have reported..

[Foreign Language] And now we're going to answer the question that we have received online. [Foreign Language] And this time again, we received a number of questions, not only from minority shareholders, but also analysts and institutional investors.

[Foreign Language] Many of them have been answered already and we will conclude with one question on flexible OLED.

[Foreign Language] So this is a question from an investor and it was on whether flexible OLED will be a pure item if applied to the smartphone and what are other applications aside from the smartphone for which the flexible OLED can act as an item.

[Foreign Language] One of OLED's biggest strengths is design flexibility, which allows it to be applied on small applications like robots and smartphones as well as automotive and large applications and we understand that already in the high to small medium application market, a number of different products using the design flexibility are waiting to be launched.

[Foreign Language] LG Display has already unveiled the TV using design flexibility. The company also believes that display products using this one factor will play a meaningful role in the auto market. We have been expanding our OLED business in the auto market and some meaningful results will be shown in the near future.

[Foreign Language] The company will plan and execute a broad range of OLED portfolio that will include small, medium applications such as auto as well as large applications so that it can accomplish the kind of competitiveness that no one else has achieved before..

[Foreign Language] With that, we will now close Q4 2018 earnings conference call. Thank you once again for joining us today. Please do contact us at the IR team for any additional questions. Thank you..