Wed, Dec 01, 2004 - Page 11 News List

Toppoly woes hurt Compal

By Lisa Wang  /  STAFF REPORTER

Shares of Compal Electronics Inc (仁寶電腦) tumbled nearly 6 percent in the middle of the trade session yesterday after its liquid-crystal-display (LCD) screen manufacturing affiliate, Toppoly Optronics Corp (統寶光電), said it expects its loss to widen, blaming a drastic drop in prices for flat screens for computers.

To ease jitter investors, Compal said it would have to book NT$380 million in non-operational losses in the current quarter from the money-losing Toppoly Optronics Corp (統寶光電).

Compal, the world's second largest contract laptop-computer maker, said it already booked NT$560 million in non-operating losses in the first nine months.

Toppoly, a joint venture between Compal and Taiwan's biggest food company, Uni-President Enterprises Corp (統一企業), said on Monday that its pre-tax losses would quadruple to NT$3.62 billion from an earlier estimate of NT$913 million for this year.

"A steep price decline in bigger and middle-sized LCD screens for computers is the primary reason behind the adjustment," Toppoly spokesperson Sharon Ning (甯淑芬) said yesterday.

Uni-President owns a 24 percent holdings in Toppoly, while Compal holds a controlling one-third stake.

The remainder is owned by Teco Electric & Machinery Co (東元電機) and Toppoly employees, according to the company.

The bigger-than-expected losses hurt Compal's stock price yesterday. Compal shares fell 5.83 percent to NT$29.10 before closing at NT$30.9, the same prices as the previous day, on the Taiwan Stock Exchange yesterday.

Toppoly also backed out of a proposal to trade its shares on the Gretai Securities Market, citing a slowdown of flat-screen industry.

"Toppoly's operations have been a top concern for most investors. The widening loss will further squeeze Compal's profitability as the gross margin of its core business is already slim," said Frank Chi (紀鈞中), an analyst with Grand Cathay Securities Co (大華證券).

Compal said gross margin slid to around 5.7 percent in the third quarter from 6.8 percent in the first half.

In the final quarter, Compal's laptop shipments may hit a record high -- for the second straight quarter -- to 2.1 million units due to seasonal factors, Chi said. Sales will also rise to NT$63.4 billion from NT$54.93 billion in the third quarter, he said.

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