AUO quarterly losses much higher than expected

AU Optronics Corp (友達光電), the world's third-largest maker of liquid-crystal-display (LCD) panels, yesterday posted a quarterly loss for the first time in eight quarters as prices for computer and TV screens plunged on a glut.

AU Optronics said in a statement it suffered losses of NT$5.11 billion (US$154 million), or 0.67 a share, in the first quarter, compared with net profits of NT$6.65 billion, or NT$1.09 per share, a year ago. The last time AU Optronics reported losses was in the first quarter of 2005.

The first-quarter results fell short of most analysts' expectations.

`much worse'

Eric Lin (林宜正), a LCD industry analyst with Yuanta Core Pacific Securities (元大京華證券), said the results were much worse than he had expected. Lin had forecast losses worth NT$2.5 billion.

"We feel the market is recovering from the bottom hit in February. This quarter, customers are building up their inventory more aggressively than in the past," AU Optronics chairman Lee Kun-yao (李焜耀) told investors yesterday.

AU joined its bigger rivals Samsung Electronics Co and LG Philips LCD Co in predicting a rebound for the volatile LCD industry.

A supply constraint is expected to occur during the second half because of slow capacity expansion by the world's major LCD panel makers, Lee said.

recovery

In reaction to a faster than expected recovery in demand, panel prices started bouncing back last month and "we expect the price hike to extend into the end of the year," said Hsiung Hui (熊暉), a vice president at AU Optronics.

Prices for PC and TV panels could rebound by approximately 5 percent at a quarterly rate during this quarter, AU Optronics said.

Prices for PC and TV screens declined 27 percent year-on-year, or 11-percent quarter-on-quarter, to US$141 per unit last quarter, the company said.

The price decline has driven the gross margin to a lower level, to 0.4 percent last quarter, from 16.7 percent a year earlier and 8.1 percent in the fourth quarter of last year, it said.

Revenues expanded 22 percent to NT$80.72 billion from NT$66.25 billion a year ago, the company said earlier this month.

Boosted by growing demand, factory usage would rise to close to 95 percent this quarter from 80 percent last quarter, AU Optronics said.

Shipments of TV and computer panels would increase by 25 percent and 10 percent quarter on quarter respectively, the company said.

Despite the positive forecasts on key indicators, Lin said the growth strength may not be enough to help AU Optronics completely move out of the red.

AU Optronics shares jumped 2.27 percent to NT$54 yesterday. Stock prices of local competitor Chi Mei Optoelectronics Corp (奇美電子) were up 2.92 percent to NT$37.05.

Chi Mei is expected to post NT$400 million in losses for the first quarter tomorrow.