Taiwan's third-largest manufacturer of flat-panel displays, Chunghwa Picture Tubes Ltd (
Chunghwa Picture announced that it expected to post a pre-tax loss of NT$2.9 billion this year from a previous forecast of a NT$3.6 billion profit.
The report comes as a result of writing off an unprofitable manufacturing plant in the UK earlier than expected. Chunghwa Picture originally planned to halt the manufacture of cathode-ray-tube (CRT) computer displays at its plant in Motherwell, Scotland, in February 2003.
The scale of the loss shocked investors. "This is kind of a surprise as nobody expected such a big write-off from the UK operation," said Frank Su (
"We knew earlier that Chunghwa Picture wanted to downsize the CRT plant in the UK, but we didn't expect such a big loss to be booked at one time," said Debbie Wu (吳岱玲), a TFT-LCD industry analyst at Yuanta Core Pacific Securities Co (元大京華證券) in Taipei.
The loss is an accounting adjustment, she said, and the CRT business would in fact be moved to Malaysia and China.
The decision to post the loss this year and not next year may be a bookkeeping ploy.
"The company is trying to write off everything this year to make next year look better," Su said. "In 2003, Chunghwa Picture will definitely book losses in its TFT-LCD business, so it is better to book the [UK plant] loss this year," Wu said.
In addition to CRT monitors, Chunghwa manufactures the thin-film transistor liquid crystal display (TFT-LCD) panels that are used to make flat-panel computer screens and TVs. The company also recently started to produce large-screen flat-screen displays, called plasma displays, which can measure 127cm diagonally.
It is not just in its core business of TFT-LCD panels that Chunghwa Picture is losing money.
"In 2002, Chunghwa Picture will definitely not be profitable in TFT-LCD panels, and in plasma displays it won't make money over the next two years," Su said.
He said that the only area in which the company would see any profit would be in components, but "in all major lines the company is losing money."
Another analyst, who preferred to remain anonymous, saw no light at the end of the tunnel for Chunghwa, suggesting that the firm could go belly up next year.
The company said it had received more orders than it could fill in January and it raised its wholesale prices last week, but analysts felt the order was an anomaly.
With new factories being opened in Taiwan and South Korea, more TFT-LCD panels will flood the market in the second quarter next year, increasing competition and pushing prices down.
Chunghwa's shares closed limit-down at NT$11.4 following the revised forecast yesterday.
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