LG Electronics Inc Q3 2021 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] I'd like to post 2 questions on H&A. First, with a spike in logistics costs, I'm wondering about the impact on the profitability level of H&A and company. And also, I'm wondering what will be your corporate strategy in response to the logistics disruption that is appearing recently? My second question is related to H&A as well. I'd like to understand the proportion of new appliance sales and its trend. And can you forecast the new appliances business down the road by region? Unidentified Company Representative [Interpreted] Let me take your question on H&A. It was about our corporate response and strategy with respect to logistics disruption. As you know, the air and sea transportation costs are hitting a record high every day, and that is hampering the profitability of H&A company. 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 28, 2021 / 7:00AM, 066570.KS - Q3 2021 LG Electronics Inc Earnings Call According to many research firm, it is forecast that the phenomenon will persist until the first half and even up until the second half of next year. And some predict that it will take another 1 to 2 years more. If we look at its impact on our top line revenue, it is decreasing our top line revenue by 2% on a year-on-year basis. And in line with this, we are trying to deploy more extra ships in collaboration with global shipping companies so that we can minimize its impact on our supply side. Also, we are trying to curve the spike of logistic costs by optimizing our global supply chain. In 2022 as well, based on a solid supply chain and logistic network, we are going to make timely decisions and take them into action with speed so that we can minimize the risk on our supply side. Furthermore, based on a solid partnership with our -- partnership in companies, we are working on the negotiation to create a win-win operation for both of us. And also by leveraging the H&A capability and logistics competitiveness that we have built thus far, we are going to put the first priority in meeting our delivery commitment with our customers. We will strive to continue to become the leader in the market. Unidentified Company Representative [Interpreted] So let me take your question on the proportion of new appliance sales. I will say that the sales of new appliance has been recording a 2-digit level growth every year. So we are seeing the rise of the proportion from 14% in 2018 to around 17% to 18% in 2021. So I will say that the proportion of new appliances still is increasing within H&A company. Amid the COVID pandemic, combined with the trend stay-at-home activities, nowadays, consumers have easier access to product information. And the hygiene and health care functions of our home appliances have become a critical component or part of their decision making. If we look at the pattern of the sales by region, we see that this pattern is more pronounced in the markets, North America and Europe. And as the steam is deeply associated with hygiene and health care, we believe that we were able to record a high growth with our steam function, home appliances such as styler dryer and dishwasher. In the emerging markets, on the other hand, we see the demand for those products to continue to go up. And we are trying to make those products featuring hygiene and health care functions as an essential product for consumers by offering those product at a more affordable price range to increase up our sales furthermore. So also, for the consumers awareness, we are trying to leverage the successful cases in the Korean market. For this trend, we are continuing our investment in the brand, and we will try to enhance the brand positioning in the market through these efforts.

Question: Jong Wook Lee - Samsung Securities Co. Ltd., Research Division - Analyst : [Interpreted] I have 2 questions. My first question is about a power crisis in China. Did power shortage in China caused any damage in divisions of LGE? And if any, how much is the damage? My second question is for HE. Samsung Electronics officially adopted QD-OLED TVs as the next year's TV lineup. What's your position about this move? And what impact do you think it will have on LGE's WOLED TV business? And what will be the competition landscape going forward? Unidentified Company Representative [Interpreted] Answering your question on power shortage in China and its impact on production subsidiaries in China, we received a request to reduce daytime power usage in some locations, including HE division's production subsidiary in Guangdong province, from mid-September. 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 28, 2021 / 7:00AM, 066570.KS - Q3 2021 LG Electronics Inc Earnings Call We are responding by converting daytime production to the night time without significant disruptions. Moreover, in preparation of any worse situation, we added self-generation facilities and are controlling use of power for non-production purpose based on our emergency response plan. In addition, in close consultation with local governments and energy authorities, we have secured an information sharing system to know power control plans in advance. And we are constantly monitoring any change in power supply status based on the preemptive response system. So regarding the question about HE, the question was about the launch of a QD-OLED TV in next year by Samsung Electronics and the competition, the outlook. And there are, of course, the concerns about the new product launch with the adoption of a QD-OLED by the competitor, especially about the intense competition. However, we think there is a positive aspect because it can expand the OLED ecosystem. So as a response strategy, we want to solidify our image as a leader in OLED TV that we have built over the past 10 years. And also, so we will lead the OLED technology so that the customers can experience as intrinsic value such as picture quality and form factors. And we will continue to maximize our capability as the top the OLED TV manufacturer by strengthening these premium lineup and the meeting the customer needs so that we think we will be able to continue to lead the market.