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Simplo's first-half profit up 39%

"We expect monthly shipments to hit their peak in September as we see an upside from Dell's order."

Raymond Sung, Simplo's chairman and CEO

Simplo Technology Co (新普科技), the world's second-largest maker of batteries used in notebook computers, posted a 39 percent rise in net income for the first six months of the year on robust battery pack sales.

The company's net income climbed to NT$509.6 million (US$15.49 million), or NT$4.24 per share, in the first half of the year, from NT$365.5 million, or NT$3.38, a year ago, according to the company's financial statement, which was released yesterday.

Gross margins rose to 15 percent from 12 percent, while net sales were up 39 percent to NT$6.5 billion during the same period, the statement said.

Hsinchu-based Simplo was upbeat on the outlook for the second half of the year, especially in the wake of Dell Inc's global recall of batteries supplied by a Sony Corp subsidiary.

"We expect monthly shipments to hit their peak in September as we see an upside from Dell's order," Raymond Sung (宋福祥), Simplo's chairman and CEO, said at an investors' conference yesterday.

On Aug. 14, Dell announced the largest safety-related battery recall in US history for 4.1 million lithium-ion batteries used in its Latitude, Inspiron and Precision laptops.

These faulty batteries, which were made by Sony Energy Devices Corp, also prompted Apple Computer Inc to recall 1.8 million batteries last week.

urgent order

Simplo has received an urgent order of 400,000 battery packs from Dell, which will be shipped within two months.

While Apple has not approached Simplo with a similar urgent request, the Taiwanese company is a steady supplier of battery packs to the US firm, according to Sung.

"This will probably give us a chance to get more orders from Apple next year," he said.

The company is working on diversifying its product applications to cover non-notebook computer segments, hoping to raise their revenue contribution to 15 percent by 2008 from the current 5 percent.

One potential area is batteries for power tools such as saws -- a market that is currently dominated by Japanese makers, Sung said.

The company is considering breaking into this market by producing small volumes of batteries for power tools for a US client in the fourth quarter, Sung said.

Sung also expressed confidence that the company could reach its shipment target of 16 million battery packs and sales of NT$15 billion this year, up from NT$11 billion last year.

The company last year shipped 11 million battery packs, commanding a 20 percent share of the global market after Japan's Sanyo Corp.

margin pressure

While the company was upbeat on its future, an analyst, who spoke on condition of anonymity, cautioned that Simplo may face margin pressure in the next few years.

As Taiwanese makers are aggressively fighting for more market share from their Japanese counterparts by offering lower prices, this may trigger a round of cutthroat price competition, the analyst said.

Shares of Simplo closed up 2.2 percent to NT$94.8 on the Taiwan Stock Exchange yesterday.
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