Thu, Feb 24, 2005 - Page 11 News List

Yageo Corp posts fourth-quarter loss

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Yageo Corp (國巨), the nation's biggest maker of parts that control electricity flow in computers and handsets, posted a fourth-quarter loss on write-offs of idle assets.

The company had a net loss of NT$12.1 billion (US$388 million) after posting a profit of NT$34 million a year earlier, Yageo said at a press conference today. Sales, announced earlier, fell 25 percent to NT$2.2 billion.

The company said it recorded NT$12.4 billion in expenses in the fourth quarter, most of which was for goodwill payments.

Yageo posted profits in the other three quarters last year.

A new accounting rule, Statements of Financial Accounting Standard 35, requires companies to restate the value of idle assets, including goodwill -- which is the price a company paid in excess of the market value for acquisitions.

Yageo in 2000 bought factories from Royal Philips Electronics NV, Europe's biggest maker of consumer electronics.

Yageo's goodwill from the acquisition amounted to about NT$11 billion, according to Vincent Chen (陳豊丰), an analyst with CLSA Taiwan.

"Yageo may make a profit in the first quarter this year if it doesn't write off more goodwill," Chen said before the company's earnings announcement.

The company said its first-quarter factory use will rise to more than 80 percent from about 72 percent in the fourth quarter, the lowest in five straight three-month periods. Capacity use will continue to increase in the second quarter, the company said, without providing details.

Yageo said it reduced its factory use in the fourth quarter in part to help cut inventory. Shipments in the current three-month period will increase by about 4 percent compared with the fourth quarter, as selling prices decline by the same percentage, the company said.

The company in March last year had its credit rating cut by Standard & Poor's affiliate Taiwan Rating Corp (中華信評) to non-investment grade. Yageo has a rating of twBB+, one level lower than investment grade.

Yageo posted losses in 2003 and 2002 after a supply glut forced prices to fall.

The company on Feb. 16 said it will buy Compostar Technology Co (華亞電子) in a share swap. The transaction had a market value of NT$1.2 billion.

Yageo said it will use about 4.2 percent of outstanding shares to buy 52 percent of Compostar.

Yageo said it expects to become one of the world's three largest suppliers, raising its share of the global market for multilayer ceramic capacitors to 15 percent from 11 percent.

The company said the swap ratio is one Compostar share for 0.966 of a Yageo share. The companies will complete the transaction on April 21, it said. Compostar is an unlisted company that was preparing to sell shares to the public for the first time.

Yageo shares rose 1.2 percent today to NT$12.45 prior to the earnings announcement.

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