Rising Panel Prices Bolster LG.Philips

LG.Philips LCD Co. reported its best results in more than three years Tuesday amid rising prices and strong demand for its liquid crystal displays. The world's number-two panel maker reported a Q3 net profit of 524 billion won ($572 million), having lost 321 billion won a year ago. Sales jumped 43% to 3.953 trillion won, and operating profit soared to 693 billion won from 150 billion won in Q2 and a 382 billion won loss in Q3 2006. Profits fell short of the 557 billion won analysts estimated. LG.Philips said it would invest an additional 2.5 trillion won in a manufacturing facility, and that it will boost its capital spending budget next year from one to three trillion won. However, it forecasted a sequential decline in profit and revenue for Q4, due to capital upgrades, and predicted a mild drop in panel prices and the potential for waning demand. "Some upgrades in manufacturing facilities to expand our capacity will likely cause a drop in earnings in the fourth quarter," CEO Young Soo Kwon said. Analysts forecast the industry's tight demand-supply situation will continue through 2008 because panel makers have slashed capital investments over the past few years. "We see favorable conditions for the LCD market until the first half of next year," said fund manager Chang In-whan. "In the second half of next year, however, the forecast is not that bright, because the LCD industry is probably going to focus on expanding facilities." Kwon also said he expects Philips Electronics to sell down its 32.9% stake in LG.Philips to about 19.9% by year-end, adding that a couple of companies have shown interest in the stake. There has bee speculation that Japan's Matsushita Electric Industrial Co. may be a potential buyer for Philips's stake; Matsushita denies it is in talks.

Sources: Wall Street Journal, Reuters
Commentary: LCD Market Update: Channel Inventories a Concern? • LCD Panel Makers, DRAM Producers Could Be Hit By Matsushita Plant Fire
Stocks/ETFs to watch: LPL. Competitors: AUO, HIT

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