AU Optronics posts 41% hike in Q3 earnings

AU Optronics Corp (友達光電), the world's No.3 maker of liquid crystal display (LCD) screens, reported a 41-percent year-on-year increase in the quarterly earnings yesterday as higher-than-expected shipments for large-sized panels for computers and TVs offset a price drop.

Extending the strategy of building a bigger presence in the large-sized panels, AU Optronics believes the average selling price will hold steady in the current quarter, chief financial executive Max Cheng (鄭煒順) told investors yesterday.

Shipments for large-sized screens are expected to rise 15 percent quarter-on-quarter in order to catch up with customers' demand on seasonal factors, he said.

"To overcome the impact of industry cycles, AU Optronics has been aggressively expanding into every product and adjusting our capacity to the optimal items," AU Optronics chairman Lee Kun-yao (李焜耀) said. "Now we are out of the woods."

AU Optronics said earnings rose to NT$5.82 billion (US$172.3 million) in the July-September period, up 41 percent from NT$4.13 billion a year ago. Earnings per share also rose to NT$1.05 from NT$0.76.

During the same period, however, prices for mainstream 15-inch and 17-inch slim screens for computers plunged over 20 percent at an annual rate, Cheng said.

Improved product portfolio and aggressive cost-saving are behind the company's improved performance, he said.

Revenues hit an all-time high of NT$59.51 billion in the third quarter as posted earlier, or up 54 percent compared to the same period last year.

Shipments of large-sized panels nearly doubled to 8 million from 4.4 million a year earlier and rose a faster-than-expected 13 percent from the second quarter, according to the company's statement.

"The quarterly result is better than my forecast of NT$4.5 billion in earnings, as the company sold more large-sized panels," said Wang Wanli (王萬里), a vice president of Credit Suisse First Boston's Taiwan branch.

Wang gave a "neutral" on AU Optronics with 12-month target price at NT$48 per share. Wang said that the price still looks reasonable and he does not plan to adjust the target price.

"But the top concern [for investors] now is how the expected oversupply in the first quarter of 2006 will weigh on panel prices," said Helen Huang (黃玉惠), an executive director of Goldman Sachs' Asia-Pacific Investment Research.

AU Optronics yesterday echoed its bigger South Korean competitor Samsung Electronics Co's optimism about next year.

"The robust demand for LCD TVs, as we are seeing now, will ease worries about oversupply in the first quarter of next year," Lee said.

AU Optronics will spend between NT$70 billion and NT$80 billion next year for two new fabs, which will primarily manufacture panels bigger than 32-inch for TVs.

The strong slim-screen TV demand is expected to extend into the first three months of next year as the Superbowl in the US and Lunar New Year in China will further fuel demand for LCD TVs, said Hsiung Hui (熊暉), a vice president at AU Optronics.

As a result, Hsiung projected panel supply would exceed demand by just 5 percent in the first quarter of next year.

He also forecast that LCD TV sales would jump 75 percent next year -- from 2 million this year to 3.5 million.

Panels used in TVs will make up 22 percent of AU Optronics' total sales this quarter, up from 10 percent a year ago, Hsiung said.