Chi Mei Optoelectronics Corp (奇美電子), the nation's second-largest maker of flat panels for computers and TVs, posted its first quarterly earnings in the past three quarters as a price decline slowed on falling inventory.
Chi Mei expects inventory to shrink to a healthy level in the first quarter due to reduced output, which may trigger an early price hike for liquid-crystal-display (LCD) computer panels in the middle of next quarter.
"The business will hit the bottom in the second quarter and start to pick up in the third quarter ? The downturn will be more moderate this time," Chi Mei president Ho Jau-yang (
"We will not rule out the possibility of a shortage [of panels] in the fourth quarter," Ho said.
QUARTERLY RESULTS
During the fourth quarter of last year, Chi Mei eked out NT$436 million (US$13.22 million), or NT$0.05 per share, ending two straight quarterly losses since the second quarter last year, according to a company statement.
This represented a 95 percent decline from NT$8.34 billion, or NT$1.71 a share, a year earlier.
Drastic price correction has driven bigger rival LG Philips LCD Co, based in Seoul, into its third quarterly loss in a row last quarter at US$187 million in losses.
Average selling price (ASP) plunged 23 percent year on year to US$169 per unit in the final quarter of last year, but rose by 8 percent on quarterly basis, Chi Mei said.
Chi Mei expects blended ASP to drop by 3 percent to 5 percent at a quarterly rate in the first three months on seasonal factors, Ho said.
Panel shipments would fall 15 percent quarter-on-quarter, he said.
ANALYST REACTION
"Chi Mei's gross margin largely matches my expectation, but the increase in operating expense surprises me," said Frank Su (
Gross margin decreased to 10.9 percent last quarter from 24.6 percent a year ago, or a rebound from 4.6 percent last quarter.
Operating expenses, however, jumped 54 percent to NT$4.74 billion from the third quarter.
The one-time spike in operating expense would not be an obstacle on Chi Mei's progress toward a recovery in the second quarter, earlier than the company's forecast in the third quarter, said Su, who gave a "buy" on Chi Mei.
Overall, Ho said "it will be a challenging period this year and yet a high-growth year for Chi Mei."
2007 FORECAST
TV panel shipments should grow 45 percent annually to 13.3 million units this year on fast-growing demand for LCD TVs with bigger screens, Ho said.
Computer panels should increase 30 percent year-on-year to 30 million units, he said.
Chi Mei slightly cut its capital spending for this year to NT$75 billion compared to its earlier estimate of NT$80 billion and the NT$110 billion spent last year.
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