Thu, Oct 26, 2006 - Page 12 News List

AU Optronics' Q3 net income plunges

YEAR-ON-YEAR Net income fell to NT$613 million, compared to NT$5.82 billion in the same period last year due to the faster-than-expected fall in LCD panel prices


AU Optronics Corp (AUO, 友達光電), the nation's third-largest maker of flat panels, yesterday said third-quarter net income plunged almost 90 percent due to a drop in prices and higher non-operating expenses, but it offered an upbeat outlook for the current quarter.

Net income dropped to NT$613 million (US$18 million), or NT$0.1 per share, during the three-month period that ended last month, compared to NT$5.82 billion, or NT$1, earned in the same period a year ago, the company said in a statement.

AUO's quarterly results were better than bigger rival South Korea-based LG.Philips LCD Co, which reported a second straight quarterly loss for the third quarter at US$404 million. It blamed a price decline that was faster than expected.

"The price fall in computer panels hit bottom in the third quarter," chairman Lee Kun-yao (李焜耀) told an investors' conference in Taipei yesterday.

Financial officer Max Cheng (鄭煒順) said the unfavorable pricing environment had negatively impacted the company's bottom line in the third quarter.

Prices for liquid-crystal-display (LCD) panels dropped more than 33 percent to US$1,430 per square meter in the third quarter from US$2,145 posted a year earlier, the company said.

Echoing LG.Philips' guidance for a steady price trend, AUO said the price for computer panels would rebound by 5 percent this quarter, while TV panel prices would slide another low single-digit percentage point. The computer and TV panel business accounted for about 70 percent of AU Optronics' total revenue of NT$71.31 billion.

"We are seeing stronger demand across the board, including computers and TVs, compared to the third quarter," president Chen Hsuen-pin (陳炫彬) said. "We are optimistic about growth."

Shipments of computer and TV panels would expand by 40 percent at quarterly rate during the final quarter of the year after the merger with Quanta Display Corp (廣輝電子), the company said. The merger took effect on Oct. 1.

Excluding Quanta Display, AU Optronics shipped 12.6 million sheets of flat panels used in PCs and TVs. Factory usage would be more than 95 percent, the company said.

Building on that optimism, Chen said the company would expand capacity for future demand by spending NT$90 billion on new facilities and equipment next year, lower than previous estimate of NT$120 billion. It planned to allocate NT$850 for capital spending this year.

"I'm quite optimistic about AU Optronics. The company may report as strong earnings for the fourth quarter as in the first quarter," Morgan Stanly analyst Frank Wang (王安亞) said yesterday.

AUO posted NT$6.65 billion in net income for the first quarter.

Wang said AUO's operating profits matched his expectations but non-operating expenses were larger than he thought it would be.

Non-operating expenses spiked to NT$1.36 billion from NT$85 million a year ago, largely due to BenQ Corp (明基), which is 5 percent owned by the company.

Wang rated AUO "out perform" with 12-month target price at NT$59, implying around a 30 percent upside from the stock's closing price of NT$45.35 yesterday.

He said did not plan to change his view soon.

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