By Se Young Lee
SEOUL (Reuters) - South Korea's LG Display Co Ltd (KS:034220) downplayed risks of a supply glut in the global panel market after reporting its best quarterly profit in more than four years, seeking to assuage fear about a sharp profit decline later this year.
Deteriorating economic conditions in Western Europe and weaker currencies of key emerging markets like Brazil and Russia are hurting television makers. Investors and analysts worry that TV makers will cut orders and hurt panel sales, while factories of Chinese panel manufacturers scheduled to begin production later this year could weigh on prices.
Data from researcher DisplaySearch showed that prices of panels for devices such as TVs, laptops and monitors as of April 20 were broadly weaker than April 7. This pushed LG Display stock to a near two-week low on Tuesday, and the shares ended unchanged on Wednesday before the firm reported healthy profit.
Chief Financial Officer Don Kim said during a post-earnings conference with analysts that the weak share performance reflected market worries about the firm's earnings outlook. He said business conditions would be challenging in the second quarter, but ruled out the odds of a major oversupply problem.
"It's unlikely for an oversupply problem to upset the current supply-demand balance," Kim said.
Q1 PROFIT BEATS ESTIMATES
LG Display reported 744 billion won ($689.73 million) in operating profit for the first quarter, the strongest since the at least the first quarter of 2011, from when its current accounting standards apply. That compared with a 490 billion won mean estimate by 32 analysts in a Thomson Reuters I/B/E/S poll.
The company attributed the rise to stable demand for TV panels as well as belt-tightening: the firm cut production costs by around 150 billion won from the previous quarter.
Analysts say LG Display also benefited from sales of screens for Apple Inc's (O:AAPL) new iPhones and the Apple Watch, which goes on sale from this week.
Yet Apple-related sales are unlikely to reassure those worried about the outlook for LG Display, which in general earns more from larger panels.
"Though panel prices are kept to a certain level, (TV) brand vendors have revised their shipments downwards and may later face inventory pressure," said researcher TrendForce.
LG Display said shipments would likely grow at a low to mid single-digit percentage rate in the second quarter in sequential terms, and that the average selling price in the broader market is not likely to change significantly during the period.
(This version of the story recasts, adds the context and comments from LG Display)