AU Optronics sets earnings record

AU Optronics Corp (友達光電), the world's third-largest maker of liquid-crystal-display (LCD) panels, yesterday said third-quarter earnings set an all-time high on the back of robust demand and recovering panel prices.

Net income jumped to NT$22.57 billion (US$693 million), or NT$2.89 per share, compared with NT$612 million, or NT$0.1 a share, the previous year.

On a quarterly basis, the results represented close to a three-fold growth.

"In addition to the strong demand from end-user markets and stable panel prices, Synergy from merging Quanta Display Inc (廣輝電子) also contributed to the performance," chief financial officer Max Cheng (鄭煒順) said.

Gross margin improved to 23 percent last quarter from 8.4 percent the previous year and 11.4 percent in the second quarter. Revenues almost doubled to NT$137.96 billion from the previous year.

Looking ahead, "the fourth quarter should be a flat quarter. Channel inventory is quite healthy and the company will be careful [about inventory buildup] for the next quarters," AU Optronics chief executive Chen Hsuan-bin (陳炫彬) told investors.

"The way ahead is quite clear," Chen said.

In the traditionally slack fourth quarter, computer panel shipment could slide by a low single-digit percentage quarter on quarter, which would be better than the company's previous forecasts, Cheng said.

TV panel shipments could increase by more than 10 percent, Cheng said. Factory usage could rise to more than 95 percent this quarter, he said.

Average selling prices for computer panels will likely remain unchanged, but those of TV panels could drop by a low single-digit percentage, he said.

"TV demand is quite strong despite the subprime problem in the US," AU Optronics general manager Chen Lai-ju (陳來助) said.

The company projections did not completely dispel fears of a slowdown, however.

"We remain concerned about excessive inventory. And there are worries about weakening demand for monitor panels and the impact of the subprime crisis on TV sales," said Frank Su (蘇穀祥), an analyst with CLSA Ltd in Taipei.

AU Optronics, however, was bullish about the next two years and projected a panel constraint.

"We believe demand will be quite strong in 2008 and 2009," Chen Hsuan-bin said.

AU Optronics will complete its long-suspended construction of a next-generation factory to produce bigger than 50-inch TV screens by the end of this year, Chen said.

"We are seeing growing demand for TVs with screen sizes bigger than 50 inches," Chen said.

Excluding the capital for the new factory, AU Optronics will spend NT$90 billion on new facilities and equipment next year, compared with NT$70 billion this year.

"The capacity expansion plan will help AU Optronics catch up with rival LPL" in producing bigger TV screens, Su said.