Good morning and good evening. First of all, thank you all for joining this conference call. And now we'll begin the conference of the Fiscal Year 2021 Fourth Quarter Earnings Results by LG Display. This conference will start with the presentation followed a divisional Q&A session. [Operator Instructions].

Now we shall commence the presentation on the fiscal year 2021 fourth quarter earnings results by LG Display..

Good morning. This is Brian Ha [ph] in-charge of LG Display’s IR. On behalf of the company, let me thank all the participants at this conference call.

Today I'm joined by the CFO, Sang Hong Kim; Hian Yin, Senior Vice President of Corporate Strategy Group; Seung Min Lim, Vice President of Corporate Planning; Hee-Yeon Yi, [ph] in-charge of Business Intelligence, Daniel Lee, in-charge of Large Display Marketing, He Young Kwan [ph], Vice President of Medium Small Display Marketing; and Yu Han Soon [ph], Vice President of Auto Marketing.

The conference call will be conducted in both Korean and English. Please refer to the provisional earnings release today or the IR Events section in the company's website for more details on the financial results of Q4 2021. Before presenting the company's earnings, there will be a presentation on OLED EX a new technology for large OLED.

It can be viewed via mobile devices or a video webcast through an IT device as well as on the IR website. The OLED EX presentation will last for about 5 minutes, followed by a briefing on the financial results of Q4 2021 and the company's outlook for Q1 2022 and Q&A.

The technology presentation will be led by Min Yu Jin [ph] in-charge of life display promotion. The company's large OLED has been evolving and developing ever since its launch, culminating in the OLED EX technology. This presentation is in English with Korean subtitles at the bottom of the screen..

Hi, I want to appreciate all of you for joining us today. I'm Min Yu Jin [ph]. I'm Head of Live Display Promotion Division. I'm proud to introduce to almost in OLED evolution OLED EX. Evolutionary experience, AEX in OLED EX embodies our goal of providing customers with an evolved experience through concerning evolving technology.

Are we introduced to EX technology, the core of OLED EX, which enables evolved experience, EX technology improves, product efficiency and brightness by increasing the stability of organic light emitting devices, which are the most important elements in creating great picture quality of OLED.

And the two key step enable this technology are; deuterium and personalized algorithms. Deuterium is an element also known as heavy hydrogen. And as name implies it returning as a similar structure to [technical difficulty] hydrogen, but it has an extra neutron. It is not artificially synthesized. It is a real natural element.

However, there is only one item of deuterium for every 6,000 atoms of hydrogen. We developed the technology to extract deuterium from water to replace hydrogen in existing OLED materials.

Our OLED materials maintained their original shape, but become more stable through our deuterium substation process, meaning that they are stronger against electrical stimulation and heat, which means they remain more reliable for longer even at high brightness. In the end, we developed a highly stable device that emit brighter light.

Using deuterium OLED EX can be realized a higher level of natural brightness and detail similar to what we've seen in real life. The second key to EX technology is personalized algorithms. We use personalized algorithms to control OLED's brightness and enhanced performance by predicting usage for each device according to viewing patterns of each user.

I often display places I want to travel to after the pandemic on my OLED TV. This is one of them. It is an aerial view of granted prismatic spring or hugely hot spring and Yellowstone National Park in the U.S. It looks almost like the sun blazing.

Doesn't it? Some days, I live this scene for a long time, and the blue pixels on my OLED TV are, of course, used a lot for the blue part. The green parts use mostly green cell pixels. And as you can guess, the led parts use mostly less pixels.

This is where our personalized hydrogen technology comes into play intelligently predicting usage and optimizing each WRG and B element to maintain stable use. These personalized algorithms combined with deuterium, which we just talked about, give our OLED panels their strength.

With EX technology, our OLED has evolved to become stronger than ever with 30% increased brightness and natural colors, we produced with greater detail. OLED EX decrease details actually the way content creators intended. Design is also no exception when it comes to the evolution of OLED EX.

OLED EX Introduces a new bezel that's about 30% now than before, making this the most aesthetically pleasing design of any existing OLED. We took innovative evolution a step further to satisfy the most many consumers without making any compromises that OLED image quality or slim design.

We can sum up OLED EX philosophy of evolution with the world's great detail, meaning detailed innovation to bring our customers' perfect picture quality.

The reason why we bet on and focus the tenures of technical expertise on developing the detail is simple because every detailed innovation results in the details in the content our customers experience, this is not only important for Hollywood filmmakers and other professionals.

This is also very important for everyone who wants to capture, get most in and fill every last detail. OLED EX panels with EX technology will be used in all of our OLED TV panels from the second quarter of 2022. And we will continue to showcase new innovative products with pursuing natural reality, the philosophy that guides us.

With OLED EX, we will bring our customers evolved experience with OLED and show evolved leadership in the global OLED market. Thank you..

Thank you for your attention. Before we begin the presentation, please take [technical difficulty] Please note that today's results are based on consolidated IFRS standards prepared for your benefit and have not yet been audited by an outside auditor. There has been a revision to the KIFRS number 1016 on property, plant and equipment.

In applying the revision, the company modified how we account for prototypes that are sold during a planned test operation. It used to be that the net selling price of the goods produced during test operation would be deducted as PPE as the acquisition cost. But with the amendment, the cost has to be recognized as profit or loss.

Early application of the amendment has caused some changes from our earnings in 2020. With that said, we will now start with the presentation on Q4 2021 earnings results. Let me start off with our business performance in Q4. Revenue in Q4 was KRW 8.881 trillion.

It was driven by the higher share of large and medium and small OLED an increase in IT panel shipment following the business structure upgrade. It was the highest ever for a quarter, up 22% Q-o-Q and up 18% Y-o-Y. Operating profit was KRW 476 billion. It was down 10% Q-o-Q due to continued decline in LCD TV panel price and year-end one-off costs.

In terms of actual performance, excluding the one-off factors, it was in line with market expectation. Operating profit margin in Q4 was 5%, with EBITDA margin at 19%. Net profit was KRW 180 billion. Let me now go over our business performance for the year. Revenue in 2021 was KRW 29.878 trillion and operating profit was KRW 2.231 trillion.

Revenue was the highest ever, while profitability was also considerably improved, thanks to the turnaround in OLED and upgrade in our business structure. Revenue was up 23% Y-o-Y. We turned around to profit with operating profit margin of 7%. Next is Area shipment and Area ASP.

Area shipment in Q4 was 9.36 million square meters, increasing 12% from the previous quarter. IT panel shipment remained solid and large OLED panel shipments grew on the back of strong demand for high-end TV. Area panel price was $806, up 8% Q-o-Q, thanks to shipment growth in large and medium small OLED.

The company's production capacity in Q4 decreased 3% Q-o-Q, owing to line adjustment to prepare for new models and additional allocation to R&D. Next is Q4 revenue breakdown by product segment. IT panel, our standout among competition maintained the biggest portion at 42%.

TV panels came in next with 27%, down 5 percentage points Q-o-Q despite higher shipment of large OLED due to declining LCD TV panel price. Mobile and others accounted for 31%, up 8 percentage points Q-o-Q, thanks to growth in shipment of P OLED smartphones and wearables. Next is the company's financial position and ratios.

The company's cash and cash equivalents at the end of Q4 was KRW 4.3 trillion. Inventory was KRW 3.35 trillion decreasing by KRW 230 billion Q-o-Q. The inventory is kept at a higher level than usual as a safety stock to prepare against supply chain uncertainties such as commodities and logistics issues.

Liabilities to equity ratio was 158%, and current ratio was 94%, both almost flat Q-o-Q. Net debt-to-equity ratio came in at 57%, improved by 6 percentage points Q-o-Q. It was down 20 percentage points Y-o-Y, showing meaningful improvement in financial soundness. Next is cash flow.

The company's cash and cash equivalents at the start of Q4 was KRW 4.209 trillion. It increased by KRW 75 billion and stood at KRW 4.285 trillion at the end of Q4. Next is presentation by the company's new CFO, Sang-Don Kim, on business performance and strategy..

Good afternoon, and good evening to shareholders, investors and analysts from home and abroad. This is LG Display's CFO, Sang-Don Kim. I went from being in-charge of finance to CFO last year, and I greet you for the first time today through this conference call.

As the new CFO, I feel the responsibility of having to deliver on the company's strategic tasks under an increasingly volatile business environment with the persistent pandemic and intensifying competition.

But also our expectations of new opportunities as we see our strategic push in the past few years to upgrade the business structure and better prepare for the future, bear fruit.

So with a sense of heavy responsibility being the CFO at such a critical juncture, I will play an active role in improving corporate performance while balancing opportunities and risks. With that, now let me move on to the guidance for Q1 2022 as well as the company's business strategy. First is Q1 guidance.

In Q1, Area shipment will decline by mid-to high single-digit Q-o-Q. But the pace of seasonal decline will not be as much as in other years. Although shipment of panels of all sizes is expected to fall due to seasonality.

IT panel continues to enjoy B2B demand coming from the increasing trend of work from home, online education and general changes in the office environment. But area price is expected to fall by mid-to high-teen digit Q-o-Q due to seasonal decline in shipments of mobile panel. Next is operational strategy for each business.

Looking back on the past year, we were able to show meaningful results in our core strategic tasks even as COVID-related volatility and uncertainty continued. More importantly, OLED is now at a stage where it can produce substantive results.

Although the TV set market saw negative growth of over 10% last year, sales of OLED TV sets grew over 60%, driving the expansion in the overall high-end TV market. The high-end TV market grew at a 30% level Y-o-Y with OLED TV's share in this market, surpassing 30% as of Q4 last year. Panel shipment recorded a remarkable growth of more than 70% Y-o-Y.

And the business turned around to profit in the second half of last year reaching the BEP level for the year. Continuing from last year, shipment growth for this year is planned at 20% for the year. We also plan to keep improving profitability based on the stronger business performance.

In the case of small and medium OLEDs, we became capable of ensuring consistency in development, mass production and quality. It is now in a stable growth path based on stronger relations with strategic partners. In mobile business, we aim to further improve profitability by expanding new models in the second half.

We will leverage our unique competitiveness to broaden outside the mobile preempt, medium-sized OLED premium market and expand to the mobility industry, including automobiles. The LCD sector also achieved outstanding results by proactively responding to market changes.

In LCD, we are maintaining the select and focused approach centered on high-end IT, in line with our strategic positioning. This year is expected to see demand adjustment after COVID-19. The company continues to secure stability in business operation by minimizing volatility.

We are gradually reducing the portion of supply-demand businesses that are highly susceptible to market conditions while increasing the businesses that can produce consistent results in strategic collaboration with customers.

Going further, anchored on OLED, we will continue to expand our business to deliver new experience and values to customers going beyond existing product areas. Last is our investment and financial management activities. CapEx last year was KRW 3.2 trillion.

It is expected to increase this year as we go ahead with the investment in small and medium OLED that was decided last year. The company will keep to the principle of keeping CapEx within EBITDA and while trying to improve our financial soundness.

The company announced today a predictable and sustainable mid-term dividend policy with a view to improve shareholder value. We will maintain a dividend payout ratio of 20% of the consolidated net profit from the business years of 2021 to 2023. Accordingly, the BOD today decided on KRW651 per share in cash dividend for the 2021 business year.

The company will keep looking for ways to improve shareholder value from a long-term perspective. Even as the pandemic lingers, we will bolster our responsiveness to the external environment to minimize risk and ensure stability in business operations. We will spare no effort to continuously heighten market confidence and create higher values.

Thank you..

That brings us to the end of earnings presentation for Q4 2021. We will now take questions. .

[Operator Instructions]. The first question will be provided by Sung Hyun Kim from Hanwha Financial Investments. Please go ahead with your question..

Now I have 2 questions. One on large OLED and another on LCD. Now first about the large OLED.

So what was the performance in 2021 and the outlook for 2022? So are there any differences between the guidance last time about the 2021 performance and the expected shipments in 2022? And also, what was the profitability for this business division? So for 2021 and also the outlook for 2022? And the second question is on LCD.

So the LCD panel price has been falling for the seventh month now. But then we are also now seeing some signs of the price decline stopping for a 30-inch and 40-inch LCD panels. Then what is the panel price outlook for LCD this year? And also for IT, we see that the IT LCD panel price also started to decline last month, so what is a similar question.

So what is the price outlook for IT panel this year?.

Now regarding the first question about the large OLED this is Daniel Lee in-charge of large display marketing responding to that..

Now first of all, as the CFO had highlighted earlier, the overall TV set market showed negative growth of over 10% last year. But among them, the OLED TV, in other words, the high-end TV continued to grow and OLED TV solidify its position in the high-end TV market.

So in the fourth quarter of last year, the OLED TV took up over 30% in the high-end TV market. To give you more highlights what we see as the -- some meaningful performances. So in the developed markets like the North America market, for the year, it took up over 30% market share. And in Europe, it was over 40% for the year.

Now not only the sales of the TV set, but accordingly, the company's panel shipments also grew by over 70% Y-o-Y. So in the second half, it turned around to profit. And for the year, it reached BEP. Now in terms of the specific shipments, we did fall a little bit short of the target in terms of the shipment.

But then in terms of the area, we did come in line with the target as we had focused more on the large OLED. This year, as the CFO had reported earlier, we -- our guidance is over 20% of increase in panel shipment. And the more recent numbers show, although they are for the weekly sales.

But so in the month of January, we see that the actual sales remained similar to the fourth quarter level. And based on our stronger business structure, we will continue to improve our profitability..

The following question will be presented by Won Suk Chung from HI Investment Securities. Please go ahead with your question..

We apologize for the inconvenience. We had not finished the response to the first question by Mr. Kim as so allow us to complete the response, and then we will take the next question..

Now this is King Yi in-charge of Business Intelligence, responding to your question about the outlook for IT panel price. Now for the IT panel compared to the TV, the decline in price was lagging behind by about 1/4. So we believe that in terms of the stabilization of the prices, it will also come later than the TV price.

But then we believe that most of the IT panel price decline will be centered on the low-end products like TN or VA. And for the high-end products where the company is strong, we believe that the price will remain stable. That is all..

Now this is He Young Kwan from the medium, small display marketing. And just now regarding the IT market outlook, there was explanation by King Yi from Business Intelligence, but I would like to just add some additional explanation. Regarding the demand outlook for IT.

Now as the -- so since the onset of the pandemic, there was a trend of working from home as well as online education, which drove the demand for IT products. But now as COVID-19 continues to be prolonged, we are also seeing the easing of restrictions in different parts of the world. And now there are increasing outdoor activities by the citizens.

So this means that the B2C demand is likely to go down. But then for the B2B, because of the back-to-office trend as well as the recovery in the economy throughout the world, we believe that the B2B demand in 2022 will remain strong. Now for the demand itself then between 2022 and 2021, the outlook is that they are going to be pretty much similar.

So a flat demand between 2021 and 2022. But then when it comes to supply, because of the soft TV market last year, starting in the second half of last year, much of the supply on the TV side has been shifted to IT, which had prompted the decline in IT prices starting in the last part of last year.

So for the short term, we believe that the IT price decline, which started in the latter part of last year will continue for the time being. But then in terms of the pace of the decline, now that is mostly concentrated in the mainstream products, whereas the company is strong in the high-end products.

So we do believe that our business will remain stable compared to the overall market. We will take the next question..

The following question will be presented by Won Suk Chung from HI Investment Securities. Please go ahead with your question..

Now I also have two questions. First is what has actually been reported through media coverage extensively recently. And that is about the cooperation between Samsung Electronics and LG Display. Samsung Electronics deciding to adopt LG displays white OLED. Now so if you could give us an update on this front.

And if new [technical difficulty] then this probably means that you are in the last stage. So can you give us comments regarding this? And the second question is Samsung Display also recently got ready for the -- or started the mass production of QD OLED.

Now then compared to the QD OLED, what does the company believe are the advantages of white OLED?.

This is the CFO responding to the first part of the question. Given that this involves not only the company but a specific customer, please understand that we are not in the position to give a comment on it or share our plan or update.

And I already explained earlier that the high-end TV -- so in the high-end TV, the OLED achieved outstanding performance and the company's plan is to continue with this growth trend based on the existing customer base.

But if new customers are to be gained, then in terms of the OLED we do believe that it will have a positive impact on increasing sales of OLED in the premium market..

And this is Daniel Lee, in-charge of large display marketing responding to the second part of the question. So the second question was about the advantages of the company's OLED over QD OLED.

And as has been explained earlier, now the launch of the OLED products by other players is a welcome development for our part because it would help mainstream the premium OLED products and will also have a positive impact on driving sales.

And it is true that there has been some media exposure at the CES, but then the actual product has not been launched in the market yet. So any comparison would have to wait until it's been launched. But I would just like to add that when it comes to the product competitiveness, it does not depend on 1 or 2 specific specifications.

So I believe that what is important is the overall quality as well as the overall competitiveness. And I do believe that the market will be able to make that decision after the launch.

And now given our history of more than 10 years since the launch as well as business operation and also based on our product competitiveness and cost competitiveness, as well as the economy of scale and the customer base as well as the readiness of our differentiated product lineup, we do believe that we are enjoying an overall competitiveness and we intend to maintain this competitive edge..

We will take the next question..

The following question will be presented by Jung Hoon Chang from Samsung Securities. Please go ahead with your question..

Now I also had 2 questions, but then I also have 1 request for clarification about the presentation earlier. So it was explained that for the fourth quarter financial performance, excluding one-off factors or the one-off costs, then the performance was actually not, believe I heard about the one-off factors.

So maybe I missed it, but if you could clarify what the one-off factors were. And then the next question is we have been hearing this year more about the outlook. So if you could give us some more highlights about the auto display.

And if you believe that there are growth drivers for auto display, then do you believe that they will come from applications or do you display form or from the customers? And the last question is. Now since the pandemic, we see many of the panel makers enjoying higher sales as well as profitability.

But then we see that like Taiwanese panel maker is enjoying like over 20% operating profit margin in the third quarter of last year. And of course, the company has also done quite well, but then I'm just wondering about the difference.

And also when it comes to the company strengthening its competitiveness and what you believe its implications will be with regards to the margin as well..

This is the CFO regarding your question about the one-off costs. Now when it comes to business performance, we have a way of sharing the good performance with investors in the form of dividend. Likewise, we also have a way of sharing our performance with those who made it possible. In other words, the executives and the employees of the company.

And the reason why I cannot give you the specific numbers today, is because we have not gone through the communication with the members of the company about how we are going to share the business performance. So please understand that it's a bit too early for us to give you further details.

But once we do go through the process, then we will create opportunities where we will be able to communicate with you on a one-to-one basis..

This is Yu Han Soon, Vice President of Auto Marketing, responding to your question about auto display. Now first about the status of our auto business. As is well known, LG Displays enjoys leadership in the auto business in terms of both sales and technology.

And especially with the auto display, the size becoming bigger and the resolution requirement also becoming higher and also more sophisticated requirement for design, the orders that we receive continue to grow. And as a result of this, for LG Display, the order backlog for the LTPS LCD and OLED remains at 90% as of the end of 2021.

And then about our Auto business strategy. Now LG Display intends to have a customized platform for the different market segments as well as the customers. Now for the Auto conditions, now in terms of the extreme conditions that are required for the auto display, now the LG Display will center its marketing on the tandem OLED.

So for the customers that value design, then we will provide our plastic OLED. And for the customers who value the higher picture quality, then we can also provide the ATO, which is the advanced thin OLED. So based on these 2 technologies, we will be able to continue to broaden our market as well as the customer base, by utilizing our OLED platform.

And last, for those wish to differentiate by cost, then we can also market our in-cell touch LTPS LCD. That is all..

And this is Hee-Yeon Yi from BI responding to your question about the difference in profitability with other players. Now the profitability difference in the LCD business comes from the differences in the customer structure as well as the product lineup.

Now when we look at the history of display business, then we see that when there is a higher share of commodity or general LCD products, then when the market is doing well, then the profitability also tends to improve considerably. But in vice versa, when the market is not doing well, then there could be big losses.

So we see that for the players like the Taiwanese player, that have a larger share of other customers and also larger share of commodity products, they have -- we see that they have benefited more than other players during the pandemic. As was explained earlier, we see that the price is falling centered on commodity products.

And for the company, we are focusing more on differentiating for the long term, and we believe that we will be ready to have a more stable business down the road..

We will take one last question..

The following question will be presented by Simon Woo from Bank of America Securities. Please go ahead with your question..

Now first of all, thank you for the good performance in the fourth quarter. And my question is pertaining to the growth potential down the road. Because we see that the OLED capacity is almost to the full and the new ramp-up can come only like in a year's time.

Then in 2022, does the company believe that there is still room for more top line growth to come for OLED, perhaps maximizing utilization rate and also enhancing productivity could help pull up the growth rate, but then you would also have limitations.

So what is the company's outlook for the further growth of OLED?.

This is Hee-Yeon Kim, of Corporate Strategy Group. So the question is pertaining to the growth potential of large OLED. Now regarding this, we see that recently, the market is moving more towards convergence. So under this trend of convergence, we believe that there will be more opportunities for the company.

So for example, based on the WRGB technology, we can supply to the TV market, not only that but IT in the gaming side, and then also utilizing our unique transparent feature for OLED we can also get ready to move into the mobile market. And in these markets for these products, the ASP would be higher than the TV.

So it is from both the revenue growth and also higher profitability that we are seeking to achieve top line growth. So in short, more growth will come after CapEx spend. So for example, there's going to be the CapEx on the [technical difficulty] begin from 2024. So there is going to be a higher sales from here.

And also, even without CapEx spend from the gaming and the transparent OLED side, the ASP is going to be higher than other applications. So let me make one correction. So about the transparent display. So it's not getting ready to enter the mobile, but it's the mobility market..

Thank you very much for the good explanation. And then this question is to the CFO. So you did emphasize the companies intend to keep the CapEx within EBITDA. But then given the fact that the EBITDA has grown considerably from the past.

From the investors' perspective, perhaps keeping it in line with depreciation and amortization would be more reasonable, because now the dividend payout is likely to be around KRW 200 billion, KRW 300 billion. So there is the EBITDA, and then there is also the taxes to be paid.

And then setting aside the working capital, after all this, then the cash is likely to be quite tight.

So what is the company's view on this comment?.

So this is the CFO, and I take that as a suggestion or a recommendation to the company, and we will take that comment into due consideration. Now as you all know very well, part of the nature of this business is that it requires large-scale investment.

And I'm sure that you also understand that this is indispensable to make sure that we achieve sustainability and also continued profitability, which are also the aspiration of both the company and the shareholders.

[Technical difficulty] aware of this, but then for the company to make sure that we get the right returns on our investment we have, and I also have five rules and one additional rule. First, we look at the -- we look at whether there is alignment between the planned investment and the company's mid- to long-term strategy.

And we also look at the market demand and also more importantly, recently, the market supply as well as the -- our selling capability and also our production capacity. In other words, we also look at the fit between our current condition and the planned investment. And we also look at the timeliness of the investment.

In other words, between the time of making the investment until the mass production, then will the production be in time for the market. And also whether it is the right time for the company to make this kind of investment, whether the company has the fundamentals to withstand this.

And of course, also the economics, which are also the more immediate factor. And we also look at the technological feasibility. In other words, whether the company has the right technology and the technological sophistication befitting this investment. So that is from the business performance side and then the one additional rule for the finance side.

And that is whether we have the financial resources to make this investment at this time. And if we lack such financial resources, then how are we going to finance that from the market. Now for the CapEx plan of the year, as was explained earlier, we will -- we intend to keep it within EBITDA.

And we are moving ahead with the investment with the answers to all of those five plus one rules with the conviction that it is the investment that we need. So I hope for your patience for a bit, and I do hope that we will be able to share in the good performance out of it. And I also hope that the time until then will become shorter. Thank you..

That brings us to the end of the conference call for the earnings presentation of LG Display Q4 2021. I thank all the participants. And if you have further questions, then please contact the IR team..