2. Operating loss in the fourth quarter of 2006 was KRW 177 billion (USD 190 million) compared to an operating loss of KRW 382 billion (USD 411 million) in the third quarter of 2006, and an operating profit of KRW 334 billion (USD 359 million) in the fourth quarter of 2005.
3. EBITDA in the fourth quarter of 2006 was KRW 559 billion (USD 601 million), an increase of 89% from KRW 295 billion (USD 317 million) in the third quarter of 2006 and a year-over-year decline of 32% from KRW 824 billion (USD 886 million) in the fourth quarter of 2005.
4. Net income in the fourth quarter of 2006 was a loss of KRW 174 billion (USD 187 million) compared to a loss of KRW 321 billion (USD 345 million) in the third quarter of 2006 and a profit of KRW 328 billion (USD 353 million) in the fourth quarter of 2005.
Ron Wirahadiraksa, CFO of LG.Philips LCD, said, “We are encouraged by our performance this quarter and the results of the enhanced cost reduction initiatives we are implementing. During the fourth quarter, we were able to reduce our COGS per square meter in KRW by 10% sequentially. In addition, we maintained finished goods inventory levels at slightly under three weeks at the end of the quarter. Further, the increasing number of long-term supply agreements we have secured, reflects our continued focus on closer customer collaboration as we head into a challenging market environment in 2007.”
“Responding to the needs of our customers and a rapidly evolving global business environment remains a key focus of LG.Philips LCD,” Mr. Wirahadiraksa continued. “We believe our strategy is strong and that the new leadership team, announced in late December, will further enhance the Company’s global standing and business capabilities.”
Fourth Quarter Financial Review
Revenue and Cost
Revenue in the three-month period ended December 31, 2006, increased by 3% to KRW 3,065 billion (USD 3,296 million) from KRW 2,963 billion (USD 3,186 million) in the corresponding period of 2005. TFT-LCD panels for TVs, desktop monitors, notebook computers and other applications accounted for 48%, 27%, 21% and 4%, respectively, on a revenue basis in the fourth quarter of 2006.
Overall, the Company shipped a total of 2.3 million square meters of net display area in the fourth quarter of 2006, a 14% increase quarter-on-quarter, with an average selling price per square meter of USD 1,414. This represents a decrease in the average selling price per square meter of net display area of approximately 3% compared to the end of the third quarter of 2006 and an average decrease of 1% from the third quarter of 2006.
The total cost of goods sold increased 2% sequentially to KRW 3,090 billion (USD 3,323 million), and increased 26% year-over-year driven by shipment growth. The cost of goods sold per square meter of net display area shipped was KRW 1.4 million (USD 1,460) for the fourth quarter of 2006, down 10% from the third quarter of 2006.
Liquidity
As of December 31, 2006, LG.Philips LCD had KRW 954 billion (USD 1,026 million) of cash and cash equivalents. Total debt was KRW 4,121 billion (USD 4,431 million), and the net debt-to-equity ratio was 46% as of December 31, 2006, compared to 57% as of September 30, 2006.
Capital Spending
Capital expenditures in the fourth quarter of 2006 were KRW 324 billion (USD 348 million) compared to KRW 1,396 billion (USD 1,501 million) in the fourth quarter of 2005, and were primarily invested in Gen 5.5, the Poland module plant, the enhancement of production efficiency, and the maintenance of existing facilities.
Utilization and Capacity
Total input capacity on an area basis increased approximately 17% sequentially in the fourth quarter, mainly attributable to the ramp up of P7, which currently averages 78,000 input sheets per month.
Outlook
The following expectations are based on current information as of January 16, 2007. The Company does not expect to update its expectations until next quarter’s earnings announcement. However, the Company may update its full business outlook, or any portion thereof, at any time for any reason.
“For the first quarter of 2007, we anticipate a mid-single digit decrease percentage in total area shipments sequentially, where TV decreases by a high-teens and IT increases by a mid-single digit percentage,” commented Mr. Wirahadiraksa. “We anticipate the ASP per square meter at the end of the first quarter of 2007 as well as the average ASP during the quarter to decline by a low-teens percentage, which is the same for TV and IT.”
Mr. Wirahadiraksa continued, “Our COGS reduction per square meter is expected to be a mid-single digit percentage in the first quarter. Accordingly, our EBITDA margin for the first quarter of 2007 is expected to be a mid-teens percentage. Looking forward to 2007, we anticipate continued progress in our cost reduction efforts and expect that these strategies will reduce costs by 25 to 30 percent.”
“Our CAPEX guidance for 2007 remains at approximately KRW 1 trillion. Our 2007 CAPEX will be utilized for future production facilities, production efficiency enhancement and existing facility maintenance, thereby providing us with more operational flexibility,” Mr. Wirahadiraksa concluded.
