[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 Fiscal Year 2020 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 2020 fourth quarter earnings results by LG Display..

[Foreign Language] Good afternoon. This is Daniel Lee in-charge of LG Display's IR. On behalf of the company, I would like to thank all the participants for joining our conference call today.

Today I am joined by our CFO, DH Suh; Hee Yeon Kim, Senior Vice President of Corporate Strategy Group; Seung Min Lim, Vice President of Corporate Planning; Stephen Ko, Vice President of TV Marketing; Jae Kwon, Vice President of IT Strategy and Marketing; and Ki-Joon Jin, in-charge of Auto Marketing.

Today's conference call will be conducted for one-hour in both Korean and English starting with the presentation of the financial results of Q4 2020 and the company's outlook, which will then be followed by a Q&A. Please refer to the IR presentation documents in the company's website for more details on the financial results of Q4, 2020.

For those joining through the webcast please refer to the details on the widget on your screen. And before we begin the presentation please take a moment to read the disclaimer. And also 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.

With that said, we will now start with the presentation on Q4 2020 earnings results. Let me first start off with our business performance in Q4. Revenue was up 11% on quarter reporting KRW7.460 trillion. Strong demand for TV and IT products and increases in shipment for OLED and P-OLED drove the top-line growth.

Driven by robust shipment of high value-add products and as strategic task for each of the businesses where we've placed a strong focus started to bring visible results operating profit was up KRW521 billion on quarter to record KRW685 billion. Operating margin was 9% with EBITDA margin at 24%.

Due to a revision of the tax law there was a reversal of deferred corporate tax credit with net profit reporting KRW621 billion. Next is on area shipment and ASP. Q4 area shipment was up 5% on quarter to report 8.7 million square meters.

On growth in large OLED and small to midsized mobile panel shipment and higher LCD panel prices blended ASP was up 12% on quarter and 30% on year reporting $790. The company's production capacity remained flat Q-on-Q. Next is on Q4 revenue breakdown by product segment.

In terms of the revenue breakdown, IT panel accounted for the highest portion at 37%, TV panels 29%, while mobile and others accounted for 34%, up 5 percentage points on quarter driven by higher shipments for small to mid OLED panels. Next is on the company's financial position and ratios.

The company's cash and cash equivalent as of Q4 end was KRW 4.3 trillion and the inventory was KRW 2.170 trillion down KRW 230 billion Q-on-Q. Q4 borrowings on the financial statement fell KRW 305 billion compared to the third quarter.

As for the financial ratios liabilities to equity ratio was 175%, current ratio 101% and net debt-to-equity ratio came in at 77%, all posting an improvement on a Q-over-Q basis. Cash flow was up KRW 929 billion on quarter coming in at KRW 4.297 trillion as of the Q4 end. Lastly on the company's guidance for Q1 2021.

We project Q1 area shipment to be flat Q-on-Q and blended ASP is expected to decline by high single digits due to seasonality. Next is presentation by the company's CFO, DH Suh. .

Good afternoon. This is DH Suh, CFO of LG Display. Before presenting on Q4 performances, I would first like to wish all of you our shareholders, investors and analysts all good health as we are in the midst of the COVID-19 pandemic.

Q4 saw Q-on-Q growth in shipment for large OLED and plastic OLED panel for mobile and with good demand for TV and IT products, LCD panel price continued an uptrend. As such revenue was up 11% on quarter and 16% year-over-year.

In terms of the P&L we've seen increase in shipment volume as well as meaningful improvement in the product mix which drove operating profit of KRW 521 billion on Q-on-Q. And on an year-over-year basis there was a sizable improvement with a turnaround to profit.

In particular was the new OLED fab in Guangzhou ramping up production which led to growing panel sales for OLED TV and based on increase in production underpinned by stable management of the plastic OLED business we were able to bring meaningful performance improvement.

[Foreign Language] Also leveraging opportunities from the spread of the remote working increase in indoor activities with its distinctive competitive edge, IT business continues to report stable performances. And on top of that LCD TV has also contributed to profitability improvement.

Underpinned by such results Q4 EBITDA margin reported 24% highest ever in 15 quarters. Next is on the guidance for Q1 2021. Compared to a typical seasonality, we expect demand for TV and IT products to stay solid in the first quarter.

While we expect area shipment to stay flat Q-on-Q blended ASP is projected to decline by upper single-digit on product mix changes on the back of seasonality. Although overall, we expect solid market demand in Q1 compared to the past, unexpected volatilities may surface driven by FX rate and seasonality factors.

As such we will closely monitor and respond accordingly to business environment. Next is on update and outlook for each business segment. After the new Guangzhou fab came online, sales have been quite good as we continued on with steady shipment. As such Q4 OLED TV panel shipment was around 1.6 million units, which is up 50% on year.

What is more encouraging is that the end consumers are clearly seeing the distinct value that is intrinsic to OLED.

COVID-19 has brought on changes to people's lifestyles with TV taking on a greater part of that lifestyle and the value that OLED offers in terms of precise and accurate picture quality, design, healthy eyes have been highlighted further solidifying its positioning in the high-end TV market.

Based on this, we are targeting seven million to eight million annual unit sales in 2021. Supported by expanded product lineup, we will set up a solid positioning respond to diverse consumer needs and in so doing will strengthen the company's earnings base.

For the mobile business, this year we plan to further strengthen stable operational basis around plastic OLED. Based on strengthening of internal capabilities, productivity enhancements and customer relationships, we will minimize off-season volatility seen in the first half of the year and will endeavor to bring better year-over-year results.

Next is on IT and LCD TV. For IT, we -- where we have differentiated competitiveness underpinned by strong production capabilities and close relationship with our customers, we expect to further strengthen product and market leadership and continue to generate earnings profit.

For LCD TV, we will be flexible in addressing changes in the demand dynamics and customer requirements to fully leverage opportunities presented. Last topic is on the financial management.

Up until the first half of the year on the back of continuing trend of the so-called untapped or contact-free environment, we expect overall market demand to remain solid with seasonality impacting certain products. However, depending on how COVID-19 plays out, volatility may resurface.

We will be nimble in responding to opportunities and at the same time closely monitor risk factors and engage in flexible, yet stable, financial management activities. 2020 CapEx was cut from the previous level to mid KRW 2 trillion level and we will keep to the investment principle of spending CapEx within the EBITDA level.

As you've seen, we saw meaningful improvements in key financial ratios for Q4 and we will continue to sustain the improvement in financial stability. Thank you for your attention..

[Foreign Language] That brings us to the end of the earnings presentation for Q4 2020. We will now take your questions. Operator, please commence with the Q&A session..

[Foreign Language] Now Q&A session will begin. [Operator Instructions] The first question will be provided by Hyung Soo Kim from Hana Financial Investment. Please go ahead, sir..

[Foreign Language] Thank you. I’m Hyung Soo Kim from Hana Financial Investment. I would like to first congratulate you on recording such a great result. I would like to pose two questions. First on the more details relating to Q4 earnings performance? And second question would relate to the demand dynamics around LCD.

So my first question is this, we see that your Q4 results have been quite good. I think this is largely driven by a very positive and favorable market backdrop, but could you provide us with a more breakdown driver behind the business performances for each of your business areas? My second question relates to the demand dynamics surrounding LCD.

We've seen domestic players actually extend the running of their LCD fab lines.

I would like to understand what impact this will have on your second half -- on the second half demand dynamic going forward? And in line with that could you also share with us what your projections are with respect to the LCD panel price going forward?.

[Foreign Language] So I would respond to your first question. You've had for more detail regarding the Q4 earnings. Basically, as I have previously explained, compared to the third quarter, we've seen improvements on the top line revenue.

And basically this is largely driven by the fact that we were able to change the product mix much – product mix towards more highly profitable products. Second is with respect to the overall increase and the selling price or the ASP of the LCD that was also another driver.

So driven by these two factors that brought about improvement, what these factors did was actually more than compensate for the negative impact that FX rate changes had on our P&L. So at the end of the day that actually improved our P&L and profit.

So once again to sum it up, basically we were able to increase the sales volume, the top line revenue, able to improve on the product mix and also increase the pricing. And once again all of these three factors were able to offset any negative impact from FX movement and really contributed to improving of our profit.

Turning to your second question I understand your question has to do with our domestic competitor actually extending the operation of their domestic fab and what impact that would have on the LCD demand dynamic and also on the price projections. Now in terms of the demand and supply dynamics we would have to carve out those two.

So if you look into the second half of the year. First on the demand side we believe that how the COVID impact actually plays out going forward will have an impact on the demand side.

Now on the supply side, you've mentioned that our domestic competitor have decided to actually extend the operation and running of the domestic fab or whether they would do so up until the end of the year or whether they would stop midyear, it's not clear at this point.

But assuming that they will run the fab on a full year basis, I think that comparing the impact of that to the Chinese competitors ramping up and even making preparations to run the 10G fab. We understand that some have actually started to ramp up the 10G fab. But I think the timing and the size of that will have a bigger impact.

So all in all, the whole pricing mechanism is contingent on the balance between supply and demand. And basically there are multiple factors that come into play. And so it would be difficult to project to the absolute level of pricing going forward.

But as we enter into the second half from the first half of the year, we think that in terms of supply and demand dynamics, the tightness will be somewhat be improved, meaning the tightness will be mitigated and that will have impact on the pricing.

[Foreign Language] To elaborate on that one of our key three strategic tasks include structural innovation for our LCD business.

And the whole key to this is that we will further strengthen the differentiating factor of our competitive products like IT – competitive business like the IT business, and for the less competitive business areas, we will rationalize and make improvements.

So even if the demand and supply dynamic changes because we were able to enhance fundamentals and the resilience of our business we will be able to cover for any potential volatilities that may surface..

[Foreign Language] The next question will be provided by Kim Dongwon from KB Securities. Please go ahead, sir..

[Foreign Language] Thank you. Would like to ask you two questions on your OLED business. First, has to do with your W wide OLED panels. You've mentioned that your plan is to ship out seven to eight million units.

I would like to understand whether you then have plans to go about adding more capacity to your Guangzhou fab? Second question has to do with the plastic OLED business.

Can you provide us with what your projection is regarding the total shipment of P-OLED per – on an annual basis for this year that is? And can you provide some color as to your earnings direction forward?.

[Foreign Language] So yes, let me address your first question. I understand it has to do with the large OLED panels especially 2021 our plans regarding, how we're going to operate these panel lines.

And also in order to achieve the seven million to eight million target communicated what do we have any plans on the Guangzhou line? I understand that to be your question. So our – I mean based on the assumption that we will need to sell seven million to eight million units on an annual basis.

If you take into consideration our Paju capacity, which currently the 80,000 is the capacity, but through productivity enhancement activities we were able to further up that capacity to a certain extent. And with regards to the Guangzhou new fab that we currently have the capacity is 60,000.

So if you did the addition – addition it is 140,000 plus maybe a little more. So with this capacity we – it is possible for us to support that seven into eight million unit sales. So what we plan to do is we plan to closely monitor the sales trend of the OLED TVs.

As I've previously mentioned, our consumers are now clearly understanding the intrinsic value that OLED actually offers them. And also from the set customers perspective the set makers perspective they see the positive potential with respect to their OLED TVs. So we will closely watch how the Q1 trend actually plays out.

And if at a point in time, we feel that we would need to support eight million of OLED panels then -- we currently at Guangzhou there is some preparation that has been taken place of course with some more enhancement or improvement what we will be able to add about 30,000 more in the capacity.

And if the Guangzhou fab is run and utilized at that level Guangzhou fab's capacity will increase to 90,000 and then we will be able to amply support that 8 million requirement.

And so it will be quite important for us to very closely look at and observe and monitor the Q1 trend and we'll be -- when the time comes, we will once again communicate with you on the details. Responding to your second question on plastic OLED. The specific numbers I won't be able to share that with you, because it requires our customers.

So please do understand. But as you know last year, as we entered into the second half, it is true that some expressed their concerns, whether we in terms of our P-OLED business, in terms of its quality, yield and cost, whether we will be able to counter the competition that we were facing from our competitors.

But the second half experience of last year that gave us the confidence that we ran our capacity at a full level and we were still able to bring about quality stability yield and cost. And it gave us the confidence that we could actually do it. And we were also able to provide that confidence to our customers as well.

So if I were to make projections for this year, based on all the hard work that we've put in to really lay a firm basis, for this year it will be important for us to bring one level up to bring a notch up in terms of what we already have.

So of course, we would have to closely look at what the sales trend looks like from our customers' side and that will of course have an impact on our results, but we think that on a year-over-year basis, we would be able to expect quite sizable improvement. We will move on to next question please..

The next question will be provided from S.K. Kim from Daiwa Capital Market..

Thank you. And I also congratulate you on your good earnings performance. I would like to also post two questions. First this year TV makers like Samsung Electronics and LG Electronics have announced that they will focused on making mini LED TVs. So in terms of how thin it is or in terms of picture quality, it is superior vis-à-vis the LCD.

We think that mini LED will further expand the positioning of the premium segment. And sometime I think we'll start to very strongly promote that it was – it will be able to actually narrow the gap that it has with OLED on the premium side.

And so do you believe that the launch of the mini LED is going to be a hurdle for you in your pursuit of achieving the 7 million – above 7 million OLED TV sales? And do you expect that there will be some price-related pressures. Second question, your Q4 earnings was very good.

And I think that for Q1 as well, especially if you look at your strategic customers, the phone sales, mobile phone sales is expected to be quite strong as well. And also the LCD TV in terms of demand and pricing the backdrop seems very positive. So your guidance seems to be quite conservative.

May we expect a upward revision of the guidance?.

I am Stephen Ko, VP of TV Marketing. So if you look at mini LED from the whole display evolution path, so looking back at the evolution path, it starts with CRT LCD and then the next generation which is OLED, O-L-E-D.

So does mini LED fit into any of these evolutionary paths? We think that it is actually a adjustment that is made on the LCD technology on the backlight side. So one would have to question whether that actually represents an evolutionary step forward. We think that it is just a type of LCD.

So to compare mini LED vis-a-vis OLED head-to-head may not be all that appropriate but I would still like to echo what our CFO has said in terms of the value that's offered by the LED. We believe that the value of OLED has been more strengthened and is receiving a new spotlight.

Definitely that was triggered by the COVID-19 pandemic era and people were able to during the pandemic really understand the value that OLED was offering. And we think that that will still be valid in the post COVID era. There are some backdrop changes, the fact that because of COVID people's time spent on watching TV has definitely increased.

But also on top of that, the way people enjoy and consume video content have also changed. We've seen streaming services grow and also the respective subscriber numbers also go up. We think that these types of changes have been quite critical.

So in terms of what's happening, in the past the way people understood the value that was offered by large sized, large area screen was picture quality. And they thought that brighter color rendering was what was good. But nowadays, they understand that when it comes to picture quality, accurateness is important.

And all the Hollywood studios and production houses are 100% using OLED to edit their videos and do all these other work. So these days, it's the accurateness of that picture quality and natural reality that is actually conveyed by the OLED screen is considered to be the intrinsic superiority that this technology will offer.

Second point, I would like to emphasize is that, there were certain pain points that consumers have experienced when they were watching these large panel displays.

And based on the results the survey results that we took in U.S., U.K., China and Korea, when people were watching these displays over an extended period of time by watching streaming services, OLED definitely has been proven to be less harsh on one's eyes.

So there's a global accreditation or certification agencies who have issued for 2019, 2020 as well as for 2021 that OLED is the most safest display in terms of eye health and comfort. And also, a U.S.

agency called Eyesafe has also issued that announcement and also a lot of eye doctors in the United States actually recommend people using OLED displays. So OLED has been proven to be most safe and comforting to human eyes.

And so, this is a value that's been very much highlighted during the COVID pandemic period and we think that this value will stay feasible and valid even in post COVID era. Last but not least, if we look at the evolution and development of OLED since its first launch back in 2013, it had gone through many cycles of evolution.

So it actually transcended just a mere improvement in brightness or resolution or certain technical specification, it was able to really bring about differentiation in terms of design, setting itself apart compared to other technologies, like mini LED and others.

And also, there was integration and further execution development in different areas, such as gaming, education, conferencing, subway transportation, et cetera. So all through this evolutionary process, OLED was able to prove to others that the intrinsic value that it actually offers and it was also able to further solidify the value offering.

And so, we believe that, in terms of the sales of 7 million to 8 million units that we've projected for ourselves, it is feasible for us to look forward to that figure..

[Foreign Language] This is the CFO, again, responding to your second question. You've mentioned whether we have any plans further revise upward our guidance since our Q -- in terms of the Q1 performance as compared to the market consensus. I would have to say that it will be difficult for me to, at this point, specify a certain figure.

Having said that, if you look at our P&L trends Q3 and Q4, all the difficult factors that weighed in on our P&L, thanks to the endeavors and efforts of the company and the employees, we were able to mitigate somewhat that risk.

So in terms of the structural aspect for our volatility on the P&L to actually go up, we can say that, we were able to eliminate those negative factors.

So in terms of our projections for this year starting Q1 as compared to Q4 of last year, we expect the area shipment to remain flat, but the seasonality factor would of course impact the product mix changes and product mix changes in turn would have impact on our top line revenue.

So there could always be a top line decline, due to some of the technical factors. However, in terms of volatility, and if you look at the overall trends of ASP and FX rate although the direction is quite positive that those could always work as either an opportunity or a risk factor for the company.

So we think that for Q1, it will be very important for us in terms – important for us to manage these important factors. Thanks to a very committed effort of all of the employees of the company. We were able to really build out a solid base to bring about turnaround in profit.

And I can tell you that we will continue to commit and exert our utmost efforts so that we could further improve profitability..

Next question, please..

[Foreign Language] The next question will be provided by Nicolas Gaudois from UBS. Please go ahead, sir..

Good afternoon. Thanks for taking my questions. The first one is related to your LCD capacity in Korea. You've delayed so far the closure of P7 for Gen 7. And I think you were suggesting earlier, but will the production there would last potentially until the middle of this year.

Could you update us on the status as to ever this is still the base case, or you could actually keep that production going for longer than that? And secondly, regarding the plastic OLED market what is your view on the likely further adoption of OLED in tablets market beyond the existing position for that month on rate side? And would you participate into that segment, if it was to grow? Thank you..

[Foreign Language] Responding to your first question. On the domestic Paju LCD capacity, we based this on the TV panel which is -- so we have Gen 7 and Gen 8. If you first look at the Gen 8 capacity the conversion to manufacturing IT products have been almost complete.

And there are some other additional preparations and IT products are being manufactured from Gen 8 capacity. So the Gen 8 fab is going to cover the IT product offering. In terms of Gen 7 as we've communicated previous year as well, we will align ourselves with the changes in the market situation as well as our customers' needs.

And we expect there to be some changes in terms of the demand and supply balance and dynamic so we will closely monitor how things play out and we'll also consult and discuss with our customers so that without any additional resource investment within the level of headcount and capacity that we already have we will be fully flexible and responding to any needs..

[Foreign Language] I am Hee Yeon Kim. I'm SVP of Corporate Strategy Group. I am responding to the adoption of OLED and tablet. So as you already know when it comes to our OLED technology, there is plastic OLED technology for a small form factor or small size displays and larger displays which require wide RGB technology.

And based on these technologies we've already launched a foldable notebook or laptop using plastic OLED and using wide OLED we launched a gaming -- for full gaming displaced 55-inch and 48-inch.

So in terms of OLED, of course, there is the superb picture quality, but it is much thinner and lighter and it is much more flexible in terms of designing different types of form factors. So it is very optimal to apply to different suite of IT products.

For our PO plastic OLED and wide RGB, we are positioned and poised to very aggressively and actively respond to any market requirement and we are very tapping into the market quite actively. So whatever spec specification is required by our clients and customers we are fully prepared and ready to meet the customer needs..

Due to the time constraint, we will now take the last and the final question..

[Foreign Language] The last question will be provided by Woo Dong-je from Bank of America. Please go ahead. .

[Foreign Language] Yes. I would like to ask you some questions on the financials. Despite the fact that your earnings performance was quite positive, we've seen your equity price actually dip today.

Is that because of the impact of the convertible bond which we issued previously because the converting price I understand is KRW 20000 and there is a possibility of about 10% dilution? So do you have any plans maybe preemptively since your performances were quite good to actually do share buybacks? Whether that -- if that is an option? Second question is, in terms of your capital planning and if you look at your cash flow your CapEx investment was only around KRW 200 billion it seems.

And with the finishing up of the Guangzhou fab investment and also you're not – you have not yet made investments for that additional 30000 capacity.

So is it right for us to assume that if there are no new CapEx requirements that your quarterly CapEx spending is going to be low as we have seen in this quarter's figures, or are you holding up on investment in relating to the future needs because if we look at the cash outflow, it seems to be quite low in terms of investment.

So is that something for us to expect it going forward, or is this something that is one-off or temporary?.

So responding to your first question on -- in terms of whether there is possibility of the CV holders to actually convert that to shares. We are closely monitoring and checking of that possibility. Currently CV is traded on the market and CV prices to be one of the leading indicators in terms of the equity movement.

So CV holders at this point in time, we believe that they do not feel the necessity to actually convert that holding into the equity of the company. So currently CV Trading is taking place quite actively. And so despite the fact -- well your question was that, despite the fact that the earnings performance good.

The equity price had not really risen, actually had declined on the back of that is there -- is that because of the CV? Now I won't be able to confirm that one way or the other. We have not yet checked that, but we think that there is not big of a possibility for the CV holders to actually convert their holdings to equity.

[Foreign Language] Responding to your second question on CapEx, last year we have -- our CapEx spending was in the mid to upper 2 trillion won as we have previously communicated to our IR meetings. We have already made investments into large-scale OLED investment projects.

So without any significant investment or add-on investments, CapEx will remain at a low level. And that premise still holds as of today. And also, when it comes to investments, there are two different types.

One is investment for large projects and also investment for developing new models and retrofitting equipment to actually -- to produce those new models. And basically it is this latter type of investment that made up the 2020 CapEx spend.

So, if we are to assume that there isn't going to be any significant or large projects that entails a significant level of investment, we can say that we will be able to stay within the EBITDA level. Going forward, we will decide where to make investment depending on the additional business opportunity that we identify.

So, CapEx may fluctuate depending on those situations..

For Q4 2020 earnings conference call for LG Display. Thank you for joining us today. And for those of you who were unable to submit your questions due to the time constraint, please do not hesitate to contact our IR team, and we will be Happy to respond to those questions. Thank you..