AU Optronics Corp posts soaring profit

AU Optronics Corp (友達光電), the world's third-largest flat panel maker, said yesterday its third-quarter profits soared by a better-than-expected 70.5 percent on the previous quarter, thanks to booming demand for liquid crystal panels and the company's better cost control.

AU said its net income for the three months ending Sept. 30 skyrocketed to nearly NT$5 billion over the April-June quarter. The earnings per share surged to NT$0.68, which represented more than five times the NT$0.17 EPS earned a year ago.

Ongoing firm demand for LCD panels and a steady average selling price (ASP) has helped AU revise upwardly the company's after-tax profit to NT$14.1 billion for this year, from NT$10.5 billion during the second quarter.

In early August, the company first revised upward its earnings forecast for the year from NT$2.58 billion to NT$10.5 billion. The flat-panel maker's shares gained NT$0.90, or 1.9 percent, to NT$48.90 on the TAIEX yesterday.

AU expected to see the robust growth to extend to next year, due to a balanced demand and supply within the industry and wider applications for LCD panels, including flat-screen televisions.

"The growth of the industry is accelerating as reflected by the strong demand for LCD panels in the past months. We're cautiously optimistic about next year in terms of the demand-supply situation," AU Chairman Lee Kun-yao (李焜耀) said during the quarterly investors' conference.

"But it will be a big challenge for local TFT-LCD makers [to maintain high growth] due to an anticipated unstable supply of key components," he warned.

The ongoing shortage of color filters, one of the key components of LCD panels, for instance, has prompted AU to open its first advanced color-filter plant in October. The company's first 5G plant is expected to begin commercial production in the first quarter of next year.

Commenting on AU's third-quarter financial result, Marc Wang (王光毅), an analyst with Fuhwa Securities Co (復華證券), said that "the financial result is largely in line with our prediction. The fourth quarter will be a better quarter for AU as the demand for flat screens remains strong and there are no signs of a point to price drop."

Wang attributed the upward financial adjustment to the LCD maker's conservative outlook on the average selling price of LCD panels earlier this year.

AU Chief Financial Officer, Max Cheng (鄭煒順), said the surge in net income was partly because of better cost control at the company's assembly plant in the eastern Chinese city of Suzhou in Jiangsu Province.

The Suzhou plant shipped about 70 percent of the company's products and its contribution is expected to go up, Executive Vice President Lu Po-yen (盧伯彥) said.

"We will move more of our production to our Suzhou factory, which will help lower costs," he said.

As for the trend in LCD panel prices, AU Vice President Hsiung Hui (熊暉) yesterday changed his forecast for the ASP trend.

"The panel price should continue to rise slightly during the current quarter," Hsiung said. The company previously said the panel price would hold steady, or even fall a little bit during the last quarter of this year.

The ASP of LCD began to bottom out in the fourth quarter last year. It rose to US$219 each in the second quarter and to US$225 in the third quarter.

Hsiung said the company has no intention to hike flat-panel prices to a level that could hurt demand.