LG Electronics Inc Q3 2020 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Dongwon Kim - KB Securities Co., Ltd., Research Division - Analyst : [Interpreted] My question is on a corporate-wide basis and on VS. Traditionally, LG Electronics tend to have lower performance in the fourth quarter due to the burden from inventory and the increase of marketing expense. So could you explain the overall direction you expect for the results in the fourth quarter this year? And my question related to VS is do you expect a turnaround next year. And if so, through what activities do you believe you can achieve this? If you could explain based on your strategy and outlook for next year. Unidentified Company Representative [Interpreted] Let me answer your question on the corporate-wide side. Regarding your question on our performance for the fourth quarter, like I explained in my outlook presentation, due to the non-face-to-face trends brought on by COVID-19, we believe that the online sales will increase, and we will have activities with stronger performance in the new category appliances and OLED TV, together with efficient resource management, and this will lead to meaningful results. However, the fact that the COVID-19 is spreading once again in major countries, including countries in Europe and the partial countries showing a resumption to the lockdown measures, will be a risk to our business. However, we have made efforts to maintain stable and sound channel inventory and execute our marketing expenses based on sellout and manage these risks and also make continuous efforts to escape from this trend of having lower performance in the fourth quarter. So I do believe that we will be able to show improved results year-on-year this year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2020 / 7:00AM, 066570.KS - Q3 2020 LG Electronics Inc Earnings Call Unidentified Company Representative [Interpreted] Let me answer your question regarding the turnaround for VS. In 2020, due to the impact from COVID-19, based on our backlog, there was disruption to sales, which delayed the improvement to our operating loss. In the third quarter, we are seeing the market recovering, and we are maintaining growth in our sales. And as we make preparations for the new projects compared to the growth in the market, we are maintaining high growth of 20%. And we have made structural efforts to strengthen our software capabilities and improve in terms of our fixed costs. So we believe that we will be able to achieve a turnaround from the third quarter 2021. Let me explain about the strategy we have for VS business. The overall trend and the direction we are taking with our strategy has not changed. Based on the electric vehicle portfolio, since last year, we have strengthened our efforts to collaborate with advanced companies in this field based on our excellent motor capabilities. And in our smart business, so the IVI business, we are preparing for a new business based on our software capability. And for the ZKW lens business, we have the strategy of expanding our business areas from the existing European regions to include OEMs in Asia and North America as well.

Question: Jeongu Ko - NH Investment & Securities Co., Ltd., Research Division - Analyst : [Interpreted] I have questions regarding HE and BS. For HE, I think the online sales is getting emphasized a lot. So could you explain the proportion of online sales in the third quarter? And compared to the existing previous online trend, how do you see the online sales going to be going forward? And for BS, could you explain the sales trend for IT business, including PC and monitor for the third quarter? And I believe there would have been some impact from COVID-19. So could you explain about that and also the business outlook? Unidentified Company Representative [Interpreted] Related to the sales proportion coming from online channels, I believe we all know that in the current situation, it can only be that online sales proportion will increase. So according to the information that we have, we believe that similar to the market and competitors and for LGE as well, we are seeing a continuous increase in the online trend year-on-year, growing to 30% to up to 50% as well. And we believe that in this environment, this trend will continue. So considering this situation, we will strengthen overall activities related to online, for example, with online specialized dedicated products for online channels and strengthening digital marketing capabilities. Unidentified Company Representative [Interpreted] So let me answer your question related to BS. Like you mentioned, it is true that we were able to achieve meaningful growth in terms of the sales in the third quarter year-on-year and quarter-on-quarter related to our IT business, including the monitor and PC products. And this comes from the strengthening of our product competitiveness in our strategic products such as gaming monitor and grand PC. And also, with the non-face-to-face trends with the prolonged COVID-19 impact, there are more stay at home activities related to work and schooling, linking into the demand for monitor and PC products. So this contributed to our performance. And we expect to continue this growth centered around the demand created by the COVID-19 situation and the demand for high-specification products, not only into the fourth quarter, but also the first half of next year. We plan to maintain this growth in sales by maximizing the customer value we provide by strengthening the competitiveness with differentiation in our strategic products, enhancing the user convenience and quality.

Question: Jong Wook Lee - Samsung Securities Co. Ltd., Research Division - Analyst : [Interpreted] I have questions related to MC business. Due to restrictions on Huawei, we think the competitiveness of Huawei is getting weaker. So do you expect any gains from this? And also, can you share the shipment volume and strategy for your smartphone business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2020 / 7:00AM, 066570.KS - Q3 2020 LG Electronics Inc Earnings Call Unidentified Company Representative [Interpreted] Due to restrictions on Huawei, the cellphone sales of Huawei in the market is expected to decrease dramatically. And in order to capture this vacant space of Huawei, we are expecting there will be a fierce competition amongst the phone makers. Due to restrictions of Huawei in U.S., Korea and Japan, we are now expecting almost no impact in our company. However, in LatAm region, including Mexico, we are trying to replace this empty slot of Huawei with our more competitive mass-tier product and customer trust. And also, we are going to drive up our sales with our cellphones. And in the Europe region, by leveraging 5G and new form factor, we are targeting to gain this vacant slot and create additional sales for our business. Let me talk about our corporate strategy for the next year. Based on the competitiveness in cost that we earned through OEM production, we are getting a very positive feedback for our mass-tier product, which has more advanced competitiveness in terms of design, multi-camera and large screen. And next year, we are going to continue to expand our 5G lineup ranging from the low end to mid-end. And through this, we are going to increase our sales of mass-tier models, and at the same time, we are going to improve profitability. Please understand that I'm not allowed to give you any specific numbers.