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LG.Philips to Post Loss in Q2
Jul 6, 2006
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Flat-screen maker LG.Philips LCD Co. Ltd. is expected to swing to a loss in the second quarter on crumbling panel prices, and many analysts do not expect a turnaround before the end of the year.

Price competition has crushed liquid crystal display (LCD) margins, and a panel glut is seen persisting throughout the year, analysts say, especially since the soccer World Cup failed to boost flat-screen sales as dramatically as was hoped.

Analysts estimate a fall of 16 percent to18 percent in LG.Philips average panel prices in the second quarter, after an 8 percent slide in the first quarter, with seasonally weaker demand hurting monitor and notebook panel prices the most.

LG.Philips is expected to report on a net loss of 306.4 billion won (approx. U.S. $323.4 million) in the quarter ended in June, according to eight analysts surveyed by Reuters. This compares with a 41.1 billion won (approx. $43.4 million) profit a year earlier and a 47.5 billion (approx. $50.1 million) profit in the first quarter. Sales are expected at 2.3 trillion won (approx. $2.4 billion), up slightly from 2.03 trillion won (approx. $2.1 billion) a year ago but lower than 2.42 trillion won (approx. $2.6 billion) in the first quarter.

For 2006, LG.Philips is forecast to post a net loss of 367.2 billion won (approx. $387.6 million), against a 517 billion won (approx. $545.7 million) net profit in 2005, according to analysts. The annual forecast indicates the loss will narrow to 108.3 billion won (approx. $114.3 million) in the second half.

In June the company will cut its earnings before interest, depreciation and amortisation (EBITDA) margin forecast for the second quarter to 10 percent from 20 percent previously. The company also said average selling price of LCD panels would fall by a mid-teen percent in the second quarter, with shipment growing by only a mid-teen percent.

Heavy depreciation costs stemming from its newest TV panel line also continue to weigh on LG.Philips' earnings. Analysts estimate depreciation costs account for a quarter of sales. TV panels accounted for 45 percent of sales at LG.Philips in the first quarter, while monitor and notebook panels made up 50 percent.

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