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Chunghwa Picture predicts profit

Chunghwa Picture Tubes Ltd (中華映管), Taiwan's third-largest maker of liquid-crystal-display (LCD) panels for computers and televisions, yesterday said it would return to profitability this quarter, helped by healthy seasonal demand, ending yearlong losses.

Plagued by an overcapacity-driven downturn, most Taiwanese flat-screen makers posted losses for the fourth straight quarter during the July to September period, except for the top player, AU Optronics Corp (友達光電), which started to book profits in the second quarter.

"After a significant improvement in our gross margin, we believe Chunghwa Picture has a big chance to swing to the black this quarter as panel prices are stabilizing and demand is healthy," Chunghwa Picture spokesman James Wu (巫俊毅) said.

The company expects LCD-screen supply and demand would reach parity in the current quarter, Wu told an investor's conference yesterday.

Shipments for flat panels bigger than 10 inches would grow by double-digit percentage points from 4.15 million units last quarter, with the biggest contribution, or 77 percent, from computer screens, Wu said. TV panels only accoun-ted for a small 5 percent of its shipments.

The company said earlier this week that consolidated quarterly losses narrowed further to NT$698 million (US$20.8 million) from NT$3.35 billion in the second quarter primarily because of rising panel prices and aggressive cost cutting.

During the same period last year, Chunghwa Picture posted pre-tax profits of NT$2.5 billion, or NT$0.39 per share.

In the last quarter, Chunghwa Picture's revenue slid 20 percent to NT$27.5 billion from NT$22.96 billion on a quarterly basis, according to a company statement.

The thin-film-transistor (TFT)-LCD business started to eke out pre-tax profits of NT$59 million last quarter, Wu said. The gross margin also improved significantly to 8 percent from negative 18 percent in the first three months, he said.

"Chunghwa Picture's better-than-expected improvement in the gross margin surprised me. That will help the company gradually catch up with its bigger rivals [in terms of profitability]," said Ken Yu (余文耀), an analyst with SinoPac Securities Corp (建華證券).

Apart from LCD panels, Chunghwa Picture also makes traditional cathode-ray tubes and plasma-display panels (PDP) for TVs.

"I believe Chunghwa Picture is on track for better results, but the PDP business has long been a drag on the company's bottom line," Yu said.
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