The nation's flat-panel display makers are "better prepared than ever before" to enter the next industry cycle, Taiwan Ratings Corp (中華信評) said yesterday in its latest research study.
The report said domestic thin-film-transistor liquid-crystal-display (TFT-LCD) producers were more protected against industry volatility after these companies presented record-breaking performances in the second half of last year.
Flat-panel makers also excelled in this line of business more than before, thanks to good planning in the fields of merger and acquisition activity, technological upgrading, capacity expansion and operational restructuring, it said.
The report came at a time when major local panel makers are displaying their latest products at a three-day LCD display fair, which begins today at the Taipei World Trade Center Exhibition Hall I.
“The credit quality of Taiwan’s TFT-LCD manufacturers — particularly for AU Optronics Corp (AUO, 友達光電) and Chi Mei Optoelectronics Corp (CMO, 奇美電) — should continue to improve over the next three to four quarters,” Taiwan Ratings credit analyst Raymond Hsu (�?M) wrote in the report.
“Better market positions, more disciplined capital expenditures and improving economies of scale will strengthen cash flow, and therefore support future capital expenditure and debt repayments for CMO and, particularly, AUO,” he wrote.
The report said smaller players such as Hannstar Display Corp (瀚宇彩晶) and Chunghwa Picture Tubes Ltd (中華映管) were also in better financial health after recent corporate restructuring and debt reduction initiatives.
Capital expenditures of local panel makers are expected to increase slightly this year from last year, Taiwan Ratings said, adding that this small increase would not cause a significant oversupply, given continued growth in demand.
Restrained capital expenditure across the industry since the third quarter of last year have allowed manufacturers to utilize their full capacity and supported them with less price erosion and more stabilized earnings before interest, taxes, depreciation and amortization (EBITDA) margins.
Even so, Taiwan Ratings warned that industry volatility and intense global competition would make further market growth a challenge for Taiwanese manufacturers.
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