Fri, Feb 09, 2007 - Page 12 News List

AUO's fourth-quarter profits drop 86%

RECOVERY?The world's third-biggest flat-panel maker said profitability should rise as demand recovers and offsets price declines next quarter, but some observers disagree

By Lisa Wang  /  STAFF REPORTER

AU Optronics Corp (AUO, 友達光電) yesterday said its fourth-quarter earnings had dropped nearly 86 percent year-on-year as weaker than expected demand drove down prices. The world's third-biggest maker of flat panels, however, expressed optimism that demand would pick up next quarter.

Earnings in the last quarter reached NT$1.66 billion (US$50.28 million), or NT$0.19 per share, down from NT$11.47 billion, or NT$2.02 a share, a year ago, a company statement said.

Average selling prices during the period slid 32 percent year-on-year to US$1,468 per square meter.

Despite the earnings plunge, AUO again outpaced its larger rival LG Philips LCD Co, which posted losses of US$187 million in the final quarter of last year.

"Revenues will improve gradually starting in the second quarter on recovering demand after [a weak] first quarter," AUO president Chen Hsuen-bin (陳炫彬) told an investor conference.

Revenues for the last quarter jumped 30 percent to NT$94.65 billion from a year earlier with TV panels the biggest contributor.

Efficiency improvements following the acquisition of Quanta Display Inc (廣輝電子) last October would also be more significant next quarter, Chen said, adding that integration had lagged behind the company's target.

Factory usage may rebound to 90 percent next quarter from an estimated 85 percent this quarter, Chen said. Flat panel makers began cutting output last year to cope with a supply glut.

As demand is usually slow in the first quarter, shipments of computer and television panels are expected to fall 10 percent from 16.6 million units last quarter, AUO said in the statement.

Average selling price would drop about 5 percent, the Hsinchu-based liquid-crystal-display (LCD) panel maker said.

The company expects the downturn to bottom out in the first quarter as rising demand could offset the pressure from price declines due to oversupply.

"[The downturn] this time is different. Inventory has not been a big problem in the first quarter, and this should be helpful in a recovery," Hsiung Hui (熊暉), an AUO vice president, said.

But Eric Lin (林宜正), an analyst with Yuanta Core Pacific Securities (元大京華證券), did not share this optimism.

"The second quarter will be the bottom as [we don't expect] demand to rebound until late May," he said.

"AU Optronics may not be able to book profits until the third quarter when demand takes shape," Lin said after the company reported fourth-quarter earnings of NT$1.66 billion, compared with Lin's forecast of NT$1.9 billion.

To cope with fast-changing demand and reduce investment risk, AUO said it would be more careful with capital expenditure.

The company plans to spend NT$90 billion to NT$95 billion on new facilities and equipment this year, slightly lower than last year's NT$100 billion.

Shares of AUO fell 0.63 percent to NT$47, underperforming the benchmark TAIEX's 0.1 percent drop yesterday.

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