LG Display succeeded in posting an annual profit for the first time in four years. The company broke out of its loss-making streak from the second half of last year thanks to improved profitability after restructuring its business around organic light-emitting diode (OLED). Brokerages expect LG Display to remain in the black this year as well.
LG Display disclosed on the 28th that last year's annual sales came to 25.8101 trillion won, down 3% from a year earlier. Although sales fell slightly, operating profit for the year reached 517 billion won, swinging to a profit. Last year's EBITDA was 4.8711 trillion won, with a margin of 19%.
Fourth-quarter sales last year were 7.2008 trillion won, down 8% from the same period a year earlier. Operating profit during the period was 168.5 billion won, up 103% year over year. As a result, excluding the second quarter of last year (an operating loss of 116 billion won), LG Display posted a profit in every quarter.
However, the size of fourth-quarter operating profit last year fell well short of the consensus (the average of brokerages' forecasts) of 395.7 billion won compiled by FnGuide, a financial information provider. LG Display said, "It reflects one-off expenses."
Kim Seong-hyeon, LG Display chief financial officer (CFO), said on a conference call that day, "Expenses related to voluntary retirement in the 90 billion won range and incentive payments to encourage the turnaround in results for the first time in four years were reflected in last year's fourth-quarter results," adding, "Expenses that arose during the adjustment of our business and product portfolio, such as reducing low-margin products and normalizing inventories, also had an impact." Kim added, "The total size of abnormal expense factors was in the high-300 billion won range," and "Excluding these, fourth-quarter operating profit last year was in the mid-500 billion won range, above market expectations."
◇ Scaling back the LCD business and focusing on OLED
LG Display, which led the liquid crystal display (LCD) market and achieved growth, began to falter in the 2010s. Panel prices trended lower due to aggressive low pricing by local corporations backed by massive support from the Chinese government. As a result, the company fell into the red from 2022 through the first half of last year. Cumulative losses recorded during this period amounted to 5.2383 trillion won.
LG Display was able to break this trend by shifting its business structure from LCD to higher-margin OLED while also undertaking intensive cost improvements. For "operational efficiency," it implemented voluntary retirement and adjusted its product portfolio, reducing losses by 2 trillion won in 2024 compared with the previous year and achieving a further improvement of about 1 trillion won last year.
The share of OLED in sales rose sequentially from 32% in 2020 to 40% in 2022 and 55% in 2024. With the shutdown of the large-size LCD business in April last year, the portion expanded to 61%, marking a record high. Accordingly, fourth-quarter average selling price per area last year rose 49% from a year earlier to $1,297 (about 1,845,200 won).
LG Display said in particular that the performance of its mobile OLED panel business contributed positively to achieving profit. The industry believes LG Display is supplying panels for the standard, Air and Pro Max models among Apple's latest iPhone 17 lineup. The company said, "We shipped mobile OLED panels for the mid-to-high 70 million units last year, meeting our initial target."
LG Display has set a strategy to build a stable revenue structure by continuously innovating technology and cost competitiveness based on the AI transformation (AX) this year and by strengthening management operational efficiency. It will also expand capital expenditures (CAPEX) to secure future competitiveness. CFO Kim said, "Last year's capital expenditures wrapped up in the mid-1 trillion won range," adding, "This year we expect to execute CAPEX in the 2 trillion won range, higher than last year."
◇ "Business improvement will stand out more this year"… the 'memory crunch' variable
The OLED market, where LG Display is focusing, is expected to see modest growth this year. According to market researcher Omdia, global OLED panel shipments this year are projected to grow 6.1% from a year earlier. Starting with the Milan-Cortina d'Ampezzo Winter Olympics in February this year, the World Baseball Classic (March), the North and Central America World Cup (June) and the Aichi-Nagoya Asian Games (September) will all be held, leading to expectations that the OLED TV market will rebound amid the "four major international sports events." All TV OLED panels are produced in Korea, and based on last year's sales, LG Display held an 81% share while Samsung Display accounted for 19%.
Brokerages also project that LG Display will deliver a marked improvement this year, with annual sales of 26.9362 trillion won and operating profit of 1.3172 trillion won. Jang Jeong-hoon, a Samsung Securities analyst, said, "The annual sales share of the OLED business is expected to be higher than last year, and in mobile panels, with the addition of a foldable model due to changes in customers' sales strategies, the volume of relatively premium panels is expected to rise about 5% for the year," adding, "Shipments of large OLEDs for TVs and monitors are also expected to increase 11% year over year."
Kang Min-gu, an IBK Securities analyst, also said, "Starting this year, the company should be able to escape the long-running trend of first-half losses," adding, "While higher-margin mobile volumes had been concentrated in the second half, resulting in a recurring 'low in the first half, high in the second half' pattern, from the first half of this year the effects of the sale of the LCD TV business and the discontinuation of low-margin IT LCD models will be fully reflected."
However, a variable is that the IT device market, a key destination for panel supply, is currently experiencing a memory semiconductor crunch. Lee Gi-yeong, who oversees business intelligence at LG Display, said, "As memory chip price increases raise the production expense of IT devices, there will be pressure from customers to cut panel prices," adding, "At present, the impact (of higher memory prices) on the business is limited, but we are monitoring related effects as volatility could increase going forward."
Regarding investment in 8.6-generation IT OLED panels, on which competitors have begun mass production, the company is maintaining a "cautious" stance. Ahn Yu-sin, who oversees mid-size planning and management at LG Display, said, "There is insufficient visibility into adequate demand," adding, "Uncertainty in external conditions that affect demand remains high, so we will monitor market conditions and then make an investment decision on production facilities for 8.6-generation IT OLED panels."