LG.Philips LCD has lowered its outlook for liquid crystal display (LCD) prices and shipments in the first quarter, but forecast better profitability on lower costs.
As flat-screen makers are ramping up production aimed at the fast-growing market for larger, sleek televisions, investors are worried about falling prices and squeezed profit margins.They hope a surge in demand for flat-screen TVs ahead of the soccer World Cup starting in June will help offset a typical seasonal slowdown in monitor and notebook panel sales during the first half.
LG.Philips, the world’s top maker of large-sized LCD panels, said its panel price at the end of the first quarter was expected to fall by a high single digit percentage from the end of the fourth quarter.The South Korean company had previously expected a mid-single digit percentage decline in the price per square metre.
Shipments by area are expected to decline slightly from the fourth quarter, a change from previous guidance of a mid-single digit percentage increase, LG.Philips said in a statement. “Although LCD TV sales remain strong, we are experiencing greater than expected seasonal weakness in the other product segments in this period, which affects our area shipment levels,” Ron Wirahadiraksa, president and chief financial officer, said in the statement.
However, LG.Philips expected its first-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) margin to be in the mid-twenties percentage, an improvement on the previous guidance of a high teen’s percentage. “The earlier EBITDA margin guidance was too conservative,” said Lee Hak-moo, an analyst at Mirae Asset Securities. “It appears that the productivity in the new seventh-generation line is improving fast, helping reducing overall costs.”
The company’s EBITDA margin stood at 28 percent in the fourth quarter of 2005. “Given the strong performance of our newest fab, P7, we now anticipate reporting a better EBITDA performance for the first quarter of 2006,” Wirahadiraksa said, referring to the firm’s latest production facility.
He added the company also generated larger than expected cost cuts. TV panels accounted for 34 percent of the firm’s sales in the October-December quarter, while monitor and notebook panels made up 62 percent of sales.
LG.Philips started mass production at its newest LCD production line, dedicated to large TV panels, in January. Its domestic rival Samsung ranked second in large-sized LCD production last year, also began mass production at its own “seventh-generation” LCD production line in the same month. LG.Philips is expected to report its first-quarter results on April 11.