Wistron's loss prediction shocks

Wistron Corp (緯創) yesterday saw its share price falling to NT$13.30 on the TAIEX after the nation's fourth-largest laptop maker surprised investors late Thursday by drastically revising its 2004 pre-tax earnings to a loss.

Wistron, a manufacturing arm of the Acer Group, said in a statement to the Taiwan Stock Exchange (TSE) that it revised its 2004 net income forecast to a loss of NT$829.1 million (US$24.5 million) from the original estimate of a NT$1.77 billion profit predicted on March 31.

The company attributed the drastic change to a declining gross margin and losses on property sales and investments.

"We were indeed surprised by such a drastic downward revision," said Calvin Wei (魏建發), an analyst at Yuanta Core Pacific Capital Management (元大京華投顧).

"We foresaw a downward revision by around 50 percent with profits remaining positive beforehand, but not a financial statement in the red," Wei said.

The analyst predicted a dull second half of the year for the laptop maker, brought about by its price-slashing strategy to boost business that is expected to drag its gross margin down to less than 5 percent, a level lower than its peer companies.

Wistron, which delivered more than 1.2 million notebooks in the first half of the year, is expected to ship 3 million units for the full year, accounting for 55 percent of its annual revenues, to its clients, which include IBM Corp and Acer Inc, according to figures complied by Yuanta Core Pacific.

"The goal is attainable, but with a poor gross margin," Wei said.

Earlier this year, Wistron sold one of its two plants and one building located in the Philippines, resulting in a loss of NT$1.1 billion, Wistron's spokesman Frank Lin (林福謙) said in a statement released on Thursday.

The company's affiliate Aopen Inc, which saw a loss of NT$660 million in the first half as result of inventory piling up and large royalty payments on optical-storage products, also contributed to Wistron's loss.

The company, which saw its revenue grow by 80 percent to NT$53.5 billion in the first half of the year, said that the forecast revenue of NT$108.76 billion is achievable and that it expected to see undefined large-scale growth next year in view of increasing orders.

Wistron is the second TSE-listed company to revise downward its financial forecast following the corporate scandal that rocked Procomp Informatics Ltd (博達科技) in June when the company defaulted on a bond payment which later roiled both the bond and equity markets.

Last week, Elitegroup Computer System Co (精英電腦) revised downward its financial forecast for this year to a loss of NT$644.8 million from its original estimates of NT$598.9 million made on April 26. Elitegroup cited poorer-than-expected sales, overdue accounts receivable and a loss caused by falling inventory prices.

Sampo Corp (聲寶), one of Taiwan's leading TV makers, yesterday also revised its financial forecast for the year by slashing its pre-tax income to NT$50.34 million from original estimates of NT$837.46 million made on May 15, citing lower-than-expected export sales and investment yields, as well as a diminished gross margin.

The company's forecast annual revenue was reduced to NT$18.19 billion from its original assessment of NT$22.05 billion. Sampo shares dropped 0.55 percent to NT$9.10 on the TSE yesterday.