UPDATE - Taiwan's AU posts Q1 profit jump, sees strong year
Tuesday April 27, 6:28 am ET
By Baker Li
(Recasts with quotes and details)
TAIPEI, April 27 (Reuters) - Taiwan's AU Optronics Corp (Taiwan:2409.TW - News), the world's No. 3 maker of flat panel display screens, beat forecasts with a 65-fold surge in quarterly profits on Tuesday, lifted by strong demand for laptops and monitors.
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AU (NYSE:AUO - News) also forecast a more than doubling in 2004 net profit, partly betting on a nascent market for big-screen televisions. The prediction was well above market forecasts.
"Q1 results were not bad because the global economy and the IT industry continued to recover, boosting demand for our panels," K.Y. Lee, AU's chairman, told an institutional investor conference.
AU, which supplies panels for computer brands such as Hewlett-Packard Co (NYSE:HPQ - News) and Dell Inc (NasdaqNM:DELL - News), earned a net profit of T$11.7 billion ($354 million) in the January-March period, compared to T$179 million in the same 2003 quarter.
The figure beat the average T$10.8 billion profit forecast by five analysts and was above T$7.57 billion in the last quarter of 2003 as demand remained unusually strong after the seasonal Christmas sales boom, analysts said.
The results came after the close of trade, when AU's Taipei-listed shares ended down 0.66 percent at T$75 compared to a 0.95 percent fall on the main TAIEX (Taiwan:^TWII - News) index.
AU shares have more than quadrupled since a trough in late April last year, outpacing a 62 percent rise on the big board.
AU and other Taiwan rivals such as Chi Mei Optoelectronics Corp (Taiwan:3009.TW - News) and Hannstar Display Corp (Taiwan OTC:6116.TWO - News) make about a third of the world's LCD screens for laptops and monitors. AU entered the flat-screen TV business late last year.
AU's two larger South Korean rivals and flat panel industry leaders, Samsung Electronics Co (KSE:005930.KS - News) and LG Electronics Inc (KSE:066570.KS - News), have already reported very strong first quarter profits, partly on strong demand for the thin screens.
PRICING PRESSURE LOOMS?
As more households swap their boxy TV sets for sleeker and thinner models, AU aimed to lift production of liquid crystal display (LCD) screens for flat-screen TVs.
Revenue from TV screens, which yield a rich profit margin of around 30 percent, would make up around 10 to 15 percent of AU's total this year, compared to 5.7 percent in the first quarter of this year, the company said.
AU opened a new plant, using advanced production technology at the end of 2003, providing fresh capacity to meet booming demand for LCD TVs.
Looking ahead, the company expected shipments in the second quarter to rise by a "low-teen" percentage from the previous quarter, helping boost its 2004 net profit to T$41.66 billion from T$15.66 billion recorded in 2003.
While oversupply is unlikely for now -- there is a shortage in some key components -- analysts see more downward pricing pressure in the core PC sector in 2005 as Taiwan and South Korean companies use advanced technology to produce vastly more screens.
"With more output comes out, there definitely should be pricing pressure next year. What's more, we think the LCD TV market won't take off until the second half of next year," said Eric Lin, a tech analyst at Yuanta Core Pacific Securities.
Before the first-quarter report, 15 analyst forecasts compiled by Reuters Research put AU's 2004 net profit at T$36.95 billion, up 136 percent over 2003. But they see profit falling 24.5 percent in 2005.
The average selling price of a 15-inch (38-cm) computer screen rebounded to $220 in the first quarter from $175 a year earlier, but the price could fall back to around $160 in the second quarter of next year, according to JP Morgan. (US$1=T$33.0) |
