"Financial Expert" Jung Ho-young Retained as LG Display President... Investment and Inventory "Diet" of 1 Trillion Won Each

Accelerating LCD Exit Strategy, Challenges in Preserving Credit Ratings
Expecting 'Skillful Management' of Debt Ratio Amid Operating Losses

[Asia Economy Reporter Moon Chaeseok] LG Display has decided to once again place its trust in CEO Jeong Ho-young, known as a 'financial expert,' despite declining performance. He has been entrusted with the important task of accelerating the 'exit strategy' for low-profitability LCD (liquid crystal display) TVs to trim the company's financial 'fat' and raise the stagnant credit rating from 'A+' in order to secure the 'timely investment' funds necessary for competing with China in market share.

According to industry sources on the 24th, the company decided at yesterday's board meeting to retain CEO Jeong. LG Display posted a cumulative operating loss of 1.2093 trillion KRW through the third quarter, and Jeong's term was set to expire in March next year. Recently, the company reorganized its structure to strengthen the 'small and medium-sized' display business and was focusing all efforts on securing profitability and new growth momentum. Yesterday, it also announced plans to transfer about 200 to 300 employees to LG Group affiliates by the end of this year or early next year. These employees are expected to move to LG Energy Solution, LG Electronics' automotive division, LG Chem, LG CNS, LG Household & Health Care, G2R, and others.

LG Display plans to implement a 'high-intensity execution plan' to restore financial soundness by reducing investments and inventory assets by more than 1 trillion KRW each. Last month, Kim Seong-hyun, LG Display's Chief Financial Officer (CFO), identified restoring financial soundness as the top priority during the third-quarter earnings conference call. Specifically, the company plans to cut investment by 1 trillion KRW compared to the initial plan, reduce inventory assets by about 1 trillion KRW by the end of the year, and accelerate the LCD TV exit strategy.

Protecting the credit rating at 'A+' or quickly returning to 'AA-' is also an important task. Since CEO Jeong took office, the credit rating dropped to A+ in February 2020 and has not recovered for 2 years and 9 months, with concerns now about further downgrades. Over the past year, the stock price has plunged 35.8%, from 22,600 KRW to 14,500 KRW. Hana Securities recently lowered the company's projected price-to-book ratio (PBS) for next year by 16%, reflecting harsh undervaluation by the financial investment industry. According to LG Display's announcement, as of the third quarter, cash equivalents exceed 3 trillion KRW (3.264 trillion KRW), debt ratio stands at 181%, and net debt ratio is 84%. While cash flow remains relatively stable with ending cash of 3.264 trillion KRW, the situation is not yet reassuring.

Due to this complex situation, there is analysis that CEO Jeong is the right 'relief pitcher' to save the company. According to the industry, Jeong served as LG Display's CFO from 2008 to 2013. In 2011, when the company faced a crisis as severe as now with an operating loss of 763.5 billion KRW, he managed the debt ratio at 148.4%. Although it varies by industry, the financial investment sector and regulatory authorities generally consider a debt ratio below 150% as 'stable.' An industry insider said, "The performance decline was an unavoidable result of poor market conditions, and at the same time, there is an evaluation that CEO Jeong is the right person to lead the financial revival, which strengthened support for his retention within the company."