Fri, Feb 04, 2005 - Page 10 News List

Advanced Semiconductor reports `challenging' Q4

By Lisa Wang  /  STAFF REPORTER

Advanced Semiconductor Engineering Inc (日月光半導體), the world's top supplier of chip packaging and testing services, yesterday posted a disappointing fourth-quarter result, citing sagging demand and large currency exchange losses.

"The fourth quarter was a real challenge for us as clients held off orders amid inventory write-offs. Revenues have fallen short of our expectation," said Advanced Semiconductor's chief financial officer Joseph Tung (董宏思).

In the conventionally slow first quarter, revenues will drop by as much as 9 percent and gross margin will also continue to fall due to the seasonal factor, Tung said.

The company's gross margin dipped to 16.4 percent, marking the lowest level since the second quarter of 2003, according to statistics the company provided.

"But, momentum will start to build up in March ? The first quarter should be the bottom. Gross margin will bounce back next quarter," Tung said.

For the whole of this year, Advanced Semiconductor will still report double-digit growth in sales, outstripping the chip industry's overall expansion, Tung said.

To support its gross margin the company plans to keep factory use high. To do so, Tung said "we want to add as few [new facilities] as possible."

Advanced Semiconductor plans capital spending to fall to less than half of the NT$781 million it spent last year, according to Tung.

Advanced Semiconductor's fourth-quarter earnings tumbled 65 percent to NT$680 million, versus NT$1.96 billion in the previous three-month period, according to the company's statement. Earnings per share also dropped sharply to NT$0.16 from NT$0.49.

On top of falling gross margin, foreign exchange losses of NT$270 million were another major factor, Tung said.

Last year was a profitable one for Advanced Semiconductor. The company's earnings more than doubled to NT$6.3 billion, or NT$1.58 a share, compared to NT$2.74 billion, or NT$0.73 a share, in 2003.

The unaudited result for last year, however, did not include a NT$2 billion expense for goodwill impairment stemming from the acquisition of three companies, Tung said.

Deducting the expense, Advanced Semiconductor would have earned only NT$1.05 a share, rather than the NT$1.58 announced yesterday, Tung said.

Taiwanese firms will be required to disclose potential asset impairment after a new accounting rule goes into effect this year as part of the government's efforts to boost financial transparency.

"Advanced Semiconductor's announcement totally dispelled underlying worries over the impact of the new accounting practice," said George Wu (吳裕良), who manages the equivalent of US$31 million for Invesco Taiwan Ltd (景順投信) in Taipei.

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