LG Display to Cut Investment

Amid Declining Demand for Flat-Panel Screens, Korean Maker’s Spending on Facilities Will Fall 33%

SEOUL—Flat-panel maker LG Display Co. on Monday slashed its capital-expenditure target for 2012 to a three-year low, the latest indication that demand for flat-screen TVs and personal computers could remain sluggish for some time to come.

LG Display, the world’s second-largest liquid-crystal-display maker by revenue after Samsung Electronics Co., also said it has no plans to build a new LCD factory in 2012, reflecting excess supply in the flat-panel industry.

LG Display said it would spend around three trillion won ($2.8 billion) on facilities next year, down about 33% from its revised budget for this year. A month ago the company cut this year’s capital-spending budget to around 4.5 trillion won from 5.5 trillion won.

The budget for 2012 is the lowest since LG Display spent 2.9 trillion won in 2009, during the global economic recession.

Flat-panel makers have been posting steep falls in profitability as demand for TVs and personal computers sags, especially in key U.S. and European markets.

The outlook for the rest of this year, when demand typically picks up ahead of the holiday-shopping season, also remains gloomy, analysts said.

“There are no signs of demand recovery at all” for flat panels, said Park Young, an analyst at Woori Investment & Securities.

Asian flat-panel makers thrived until the first half of last year due to strong sales of high-end TVs, but market conditions turned sour toward the end of the year as demand lagged behind supply.

In July, Sony Corp. lowered its annual TV-shipment target by 19% to 22 million units. Earlier this month the world’s largest PC maker, Hewlett-Packard Co., reduced its financial outlook and announced that it will shed its personal-computer business.

Following the release of second-quarter earnings, LG Display Chief Financial Officer James Jeong said the overall demand for flat screens won’t improve significantly until early 2012 and added that the company would continue to lower production through July to reduce inventories to normal levels.

Korea Investment & Securities forecast in a report that in the current July-September quarter LG Display would show an operating loss of 152.3 billion won, which would be wider than the second quarter’s 48.31 billion and the fourth quarterly loss in a row.
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