SEOUL, July 22 (Reuters) – South Korea’s LG Display (034220.KS) reported quarterly profit more than doubled but it faces weaker profit growth in the second half, as TV sales lose momentum due to uncertainty over a global economic recovery.
Though the second half is seasonally strong, LCD makers are bracing for shrinking order books, as TV sales, which account for more than half of the sector’s total demand, weaken on concerns a debt crisis in Europe will crimp overall IT spending.
Strong demand from China and tight supplies of components boosted LCD panel prices earlier this year. Prices however started falling from June on worries of slowing demand from Europe and China, forcing panel producers to lower production.
“We are entering the seasonally strong third quarter with uncertainties involving the European fiscal crisis and (high LCD) inventory,” LG Display Chief Financial Officer Jung Ho-young said in a statement.
“Demand will grow but… panel prices will gradually fall in the third quarter and may start stabilising or rebound from September when (high) panel inventories are addressed.”
On Thursday, the world’s No.2 maker of liquid crystal display (LCD), which competes with home rival Samsung Electronics Co (005930.KS) and Taiwan’s Chimei Innolux (3481.TW) saw shipments for the current quarter rising by a teens percentage.
“Inventories in China are a concern for me and the demand situation in Europe does not look very good,” said Michael On, managing director at Beyond Asset Management in Taipei.
“Prices might weaken further to the fourth quarter. The first quarter next year could be a bottom, so from an investment point of view, LCD shares are not good targets now.”
LCD producers are now hoping reduced production, a shift to high-end panels such as those using light emitting diode (LED) technology, and a recovery in demand towards the year-end holiday season will help reverse a fall in prices.
LG Display reported a 726 billion won ($603.2 million) operating profit in April-June versus a forecast of 744 billion won from 22 analysts polled by Thomson Reuters I/B/E/S.
The result marked a sharp improvement from a profit of revised 352 billion won a year ago, but fell 8 percent from in the previous quarter, as sales of flat-screen TVs grew less than expected during the World Cup soccer event.
Sales rose to a record 6.5 trillion won from 4.8 trillion wona year ago and 5.88 trillion won in the first quarter. The company is a supplier to Apple’s (AAPL.O) iPad tablet PC, which has sold 3.47 million units since its April launch. [ID:nN20107855]
Ahead of the results, LG Display shares closed down 3.0 percent at a four-month low, lagging a 0.8 percent drop n a broader market . (Reporting by Miyoung Kim; Editing by Jonathan Hopfner and Anshuman Daga)