AU Optronics Corp (AUO, 友達光電), the world’s third-largest maker of flat panels, posted the weakest quarterly net profit in six quarters as corporations and consumers tightened spending on PCs and slim-screen TVs.
Net income plunged 96 percent to NT$860 million (US$25.83 million) in the July-September quarter, from NT$22.57 billion a year earlier. It was the lowest level since the second quarter of last year, during which the company made NT$5.92 billion, AUO said in a statement.
“We are not sure how long it will take for the industry to pick up from the U-shape trough. But, we are taking actions against this downturn,” vice chairman Chen Hsuen-bin (陳炫彬) told investors.
AUO plans to cut its capital spending for this year and next year by a combined 20 percent to less than NT$200 billion by pushing back the start of mass production of a new advanced line by one year to 2010, joining bigger rival LG Display Co Ltd’s step of slowing capacity expansion.
LG Display said earlier this month that it planned to more than halve its capital spending next year.
“AU Optronics’ reduction [in new spending on equipment] is bigger than I thought,” said a senior technology analyst with Macquarie Securities Ltd’s Taiwan branch who asked not to be named.
“That could lead to a supply shortage in the second half of next year when demand comes back, though the move may ease glut in the short run,” he said.
Macquarie had expected AUO to spend as much as NT$240 billion on capacity expansion this year and next. AUO also beat most overseas investors’ forecast of multibillion dollar losses. Macquarie has projected that the panel maker would have made more than NT$3 billion in losses.
In the third quarter, the average selling price for liquid-crystal-display (LCD) panels dropped 21 percent from last year to an average US$137 per unit, which drove gross margins down from 23 percent a year ago to 8 percent, as the weakening global economy reduced consumer consumption.
The firm said the fourth quarter could be a tougher period, citing vague prospects for new orders. Customers were conservative about Christmas holiday sales and more unwilling to build up inventories before the traditionally shopping season, it said.
To cope with the new industry slowdown, AU Optronics planned to lower its equipment loading rate by another 10 percentage points to 70 percent from 80 percent in the third quarter after a 10 percentage point drop.
“[Demand] looks not so good in the fourth quarter. We will follow our consistent policy of strictly controlling inventory as we used to do,” Chen said.
Reflecting lower factory usage, shipments of PC and TV panels may fall by 5 percent to 9 percent this quarter, from 20.72 million units in the third quarter, with TV panels making up almost half of the shipments, the company said.
Price for LCD panels used in PCs and TVs may drop by up to 13 percent quarter on quarter, it said.
Shares of AU Optronics shares and Chi Mei Optoelectronics Corp (奇美電子) both fell by nearly the 3.5 percent daily down-limit to NT$25.65 and NT$15.25 respectively, under-performing the benchmark TAIEX, which lost 2.72 percent.
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