LGPhilips LCD shares fall on gloomy Q2 outlook

SEOUL, Apr 12 (Reuters) Shares in LG.Philips LCD Co. Ltd. fell as much as 2.4 percent on Wednesday after the flat panel maker warned that margins could drop in the April-June quarter due to a slide in panel prices.

LG.Philips, the world's biggest maker of large liquid crystal display (LCD) panels, reported on Tuesday it swung to a profit in the first quarter from losses a year earlier, but warned LCD panel prices could fall further, raising fears of a persisting industry glut.

The South Korean firm forecast its margin on earnings before interest, tax, depreciation and amortisation (EBITDA) at around 20 percent in the second quarter, down sharply from 27 percent in January-March.

Analysts said an around 20 percent EBITDA margin would translate into operating losses in the second quarter, and lowered their earnings forecasts for the full year.

''The outlook for LG.Philips LCD looks weaker than expected, and a decline in panel prices could now last into the third quarter before a recovery,'' said Kim Joon-kie, analyst at SK Securities.

The panel glut is expected to persist throughout the year and keep margins thin, as makers aggressively boost capacity, betting on a surge in demand for large, sleek LCD televisions.

Lehman Brothers and Nomura Securities cut their 2006 net profit forecast for LG.Philips, citing falling panel prices and higher inventories.

Analysts expect the sector to hit a bottom in the second quarter before stronger demand bolsters earnings in the second half, but some doubted a strong rebound in profitability.

''A significant margin improvement seems unlikely despite growing demand for LCD TVs,'' said Kim Hee-yeon, analyst at Goodmorning Shinhan Securities.

LG.Philips expected LCD shipments by area to rise by a ''mid-to-high twenties percentage'' in the second quarter, after falling 5 percent in the first quarter, led by surging demand for TV panels.

However, it projected LCD prices would drop by a ''mid-to-high single digit percentage'' in the second quarter after a 7.5 percent decline in the first quarter.

LCD makers have recently announced joint investment plans as they seek tie-ups to survive margin-crushing competition.

Samsung Electronics Co. Ltd. and Japan's Sony Corp.

announced on Monday a SEOUL, Apr 12 (Reuters) Shares in LG.Philips LCD Co. Ltd. fell as much as 2.4 percent on Wednesday after the flat panel maker warned that margins could drop in the April-June quarter due to a slide in panel prices.

LG.Philips, the world's biggest maker of large liquid crystal display (LCD) panels, reported on Tuesday it swung to a profit in the first quarter from losses a year earlier, but warned LCD panel prices could fall further, raising fears of a persisting industry glut.

The South Korean firm forecast its margin on earnings before interest, tax, depreciation and amortisation (EBITDA) at around 20 percent in the second quarter, down sharply from 27 percent in January-March.

Analysts said an around 20 percent EBITDA margin would translate into operating losses in the second quarter, and lowered their earnings forecasts for the full year.

''The outlook for LG.Philips LCD looks weaker than expected, and a decline in panel prices could now last into the third quarter before a recovery,'' said Kim Joon-kie, analyst at SK Securities.

The panel glut is expected to persist throughout the year and keep margins thin, as makers aggressively boost capacity, betting on a surge in demand for large, sleek LCD televisions.

Lehman Brothers and Nomura Securities cut their 2006 net profit forecast for LG.Philips, citing falling panel prices and higher inventories.

Analysts expect the sector to hit a bottom in the second quarter before stronger demand bolsters earnings in the second half, but some doubted a strong rebound in profitability.

''A significant margin improvement seems unlikely despite growing demand for LCD TVs,'' said Kim Hee-yeon, analyst at Goodmorning Shinhan Securities.

LG.Philips expected LCD shipments by area to rise by a ''mid-to-high twenties percentage'' in the second quarter, after falling 5 percent in the first quarter, led by surging demand for TV panels.

However, it projected LCD prices would drop by a ''mid-to-high single digit percentage'' in the second quarter after a 7.5 percent decline in the first quarter.

LCD makers have recently announced joint investment plans as they seek tie-ups to survive margin-crushing competition.

Samsung Electronics Co. Ltd. and Japan's Sony Corp.

announced on Monday a $2 billion expansion of a joint LCD plant. Taiwan's AU Optronics Corp., the third-biggest LCD maker, also said on Friday it would acquire smaller local rival Quanta Display Inc. to compete with leading Korean makers.

LG.Philips is forecast to post net profit of 690 billion won in 2006, up a third on the 517 billion won earned in 2005, according to a median forecast from Reuters Estimates.

Shares in LG.Philips, the country's ninth-biggest firm with $15 billion in market value, were down 0.85 percent at 40,700 won by 0540 GMT, lagging the wider market's 0.31 percent fall.

REUTERS PV SP1212 billion expansion of a joint LCD plant. Taiwan's AU Optronics Corp., the third-biggest LCD maker, also said on Friday it would acquire smaller local rival Quanta Display Inc. to compete with leading Korean makers.

LG.Philips is forecast to post net profit of 690 billion won in 2006, up a third on the 517 billion won earned in 2005, according to a median forecast from Reuters Estimates.

Shares in LG.Philips, the country's ninth-biggest firm with billion in market value, were down 0.85 percent at 40,700 won by 0540 GMT, lagging the wider market's 0.31 percent fall.

REUTERS PV SP1212