Sat, Jan 15, 2005 - Page 10 News List

Stronger NT eating into electronics exporters' profits

FEELING THE PINCH Smaller companies and computer-related manufacturers will bear the brunt of the local currency's appreciation against the greenback, analysts predict


Taiwanese electronics exporters started to feel the pinch of growing foreign exchange losses in the previous quarter due to stronger-than-expected appreciation of the New Taiwan dollar against the greenback, industry insiders said yesterday.

The NT dollar has sharply appreciated to NT$31.917 -- a gain of more than 6 percent -- against its US counterpart in just the three-month period to December on the Taipei foreign exchange market.

Analysts said the appreciating local currency started to eat into profits of local electronics manufacturers in the fourth quarter of last year.

"Small-scale companies, or computer-related manufacturers making profits on slim gross margins, will bear the brunt," said Bill Lan (藍新仁), a portfolio manager for Jih Sun Securities Investment Trust Co (日盛投信).

Weak profitability makes those companies vulnerable to drastic currency fluctuation, Lan said.

The analyst said Compeq Manufacturing Co (華通) set a marked example, as the nation's largest maker of cellphone systems boards for companies such as Nokia Oyj only managed to maintain its gross margin at 2.72 percent.

"The adverse effect has already been reflected in their stock prices. We expect to see more similar cases as the announcement of 2004's financial results approaches," Lan said.

Compeq shares have plunged over 20 percent since the beginning of the year to a historical low of NT$8.35 yesterday.

Compeq's foreign exchange loss will expand to exceed NT$100 million (US$3.14 million) for the fourth quarter of last year, exceeding its previous estimate of NT$60 million, financial executive Hung Shih-chung (洪世忠) said yesterday.

"Drastic appreciation of the NT dollar has made our efforts to hedge losses in vain," Hung said.

Nonetheless, Compeq still managed to hit the new financial target of NT$12.7 billion in sales for last year. The company said it would lose NT$1.18 billion, or a loss of NT$0.8 per share, last year.

K-Bridge Electronics Co (科橋電子), however, was not so lucky.

This component supplier to liquid-crystal display (LCD) panel makers was forced to lower its financial projection for last year by nearly 40 percent due to the drastic currency change in the fourth quarter.

K-Bridge's revised pre-tax profit is forecast at NT$400 million, while a quarterly currency exchange loss could amount to NT$80 million, according to the company.

Although the fast revaluation of the local currency has worried investors, Yang Ja-lin (楊嘉林), an analyst with SinoPac Securities Corp (建華證券), said after an initial survey that overall impact would be moderate for most companies.

"The loss will increase in the fourth quarter from the previous quarter. Some companies may report huge losses, but that will be merely a short-term shock," Yang said.

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