Tue, Nov 01, 2005 - Page 10 News List

Chi Mei posts first profit in a year

REBOUND The company's third-quarter profit beat expectations, with market watchers saying that rising demand for LCDs has helped to stabilize panel prices

BLOOMBERG

Chi Mei Optoelectronics Corp (奇美電子), the nation's second-largest maker of liquid-crystal displays used in computers and televisions, reported its first profit in a year as demand for flat panels recovered.

Third-quarter net income rose 0.3 percent to NT$3.38 billion (US$101 million) from NT$3.37 billion a year earlier, according to figures derived by Bloomberg by subtracting first-half profit from nine-month earnings announced in a company filing to the Taiwan Stock Exchange. Tainan-based Chi Mei was expected to report a NT$2.4 billion profit, according to the median estimate of five analysts in a Bloomberg survey.

Chi Mei joined its larger rival AU Optronics Corp (友達光電) in reporting better-than-expected profit as demand for LCD TVs soaked up excess production capacity. AU Optronics said last week that demand for LCD televisions will be ``very helpful'' in absorbing capacity, and easing concerns of idle production lines in the first half of next year.

``The concentration of profitability in AU and Chi Mei will bring about consolidation among the smaller panel makers,'' said Michael On, who manages US$30 million as managing director at Beyond Asset Management in Taipei.

Shares of Chi Mei rose 7 percent to close at NT$33.70 on the Taiwan Stock Exchange yesterday.

"We underestimated the [LCD industry's] self-adjustment mechanism to deal with the oversupply situation," Wang Wanli, an analyst at Credit Suisse First Boston, said in an Oct. 27 report.

Wang said rising LCD demand has helped reduce panel price fluctuations as producers shift more production capacity to TVs from computers.

Concerns that capacity won't be utilized in the first half of next year have shaved 27 percent off Chi Mei's share price in the past three months, compared with an 11 percent decline in the benchmark TAIEX index.

Chi Mei's third-quarter sales, reported earlier, rose 75 percent to NT$41.3 billion from NT$23.6 billion.

AU Optronics's third-quarter profit rose 41 percent to NT$5.8 billion from NT$4.1 billion a year earlier as sales rose 53 percent to NT$59.5 billion.

Chi Mei said in July it plans to put its panels in one out of every five LCD TVs sold this year.

Demand worldwide for LCD TVs is poised to more than double to 22 million units this year, according to the industry's second-largest producer, South Korea's Samsung Electronics Co.

JPMorgan analyst J.J. Park expects "stronger-than-expected LCD TV shipments" and the Christmas shopping season to help panel prices remain stable until the end of the year.

LCD TVs are expected to account for 32 percent of total flat-panel demand next year, up from 23 percent this year, according to Park.

Park expects LCD TV panels to overtake desktop computer screens as the industry's largest product line in 2007.

Chi Mei, which derives over a third of its sales from LCD TVs, said earlier this month that sales in September more than doubled to NT$16.2 billion from NT$8 billion a year earlier.

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