Innolux Display Corp (群創光電), which makes liquid-crystal-display (LCD) monitor and flat panels, posted flat earnings in the second quarter as falling monitor panel prices hurt gross margins.
The Miaoli-based company made NT$3.46 billion (US$111 million) in net profits during the quarter ending June 30, compared with NT$3.46 billion a year ago, after deducting first-quarter net profits from its first-half earnings report of NT$6.77 billion.
Revenues, however, grew 15.6 percent to NT$44.52 billion from a year ago. Innolux is an affiliate of the nation’s biggest electronic component maker, Hon Hai Precision Industry Co (鴻海精密).
Innolux’s second-quarter earnings were lower than Morgan Stanley’s forecast of NT$3.81 billion and Citigroup Inc’s estimates of NT$3.51 billion.
“That is because of the price drop in monitor panels,” Innolux financial executive Thomas Hsu (許嘉成) said by telephone.
He declined to give details.
With prices declining, Morgan Stanley analyst Frank Wang (王安亞) forecast that Innolux’s gross margin may have slid by 1 percentage point to 11.3 percent in the second quarter, from 12.3 percent a year earlier.
Hsu provided guidance that “the gross margin will be at a level similar to the first quarter.” Innolux posted a gross margin of 12.29 percent in the first quarter.
“LCD monitor shipments will grow further in the third quarter. Customer inventory levels are healthy,” Hsu said.
Innolux had said earlier that shipments of LCD monitors would increase more than 20 percent sequentially in the second quarter.
Morgan Stanley said in a report on July 15 that Innolux could ship about 8 million LCD monitors in the second quarter and see a 15 percent increase in shipments this quarter.
As the downtrend in monitor prices may continue this quarter, Innolux could see a 36 percent drop in net profits to NT$2.2 billion compared with the second quarter, said Jeff Pu (蒲得宇), who tracks the flat panel industry for Yuanta Securities (元大證券).
Prices for monitor panels are expected to drop by between 12 percent and 14 percent on average in the first half of this month, compared with two weeks ago, market researcher DisplaySearch said.
Panel suppliers may be under heavy pricing pressure this quarter as monitor makers focus on inventory adjustment rather than boosting sales, it said.
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