Sat, Nov 29, 2008 - Page 11 News List

Ratings agency downgrades Chi Mei to ‘negative’


Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s Ratings Services, yesterday cut its outlook on Chi Mei Optoelectronics Corp (奇美電子) as the economy threatens to cut deeper into the panel maker’s profitability in the short term.

Taiwan Ratings revised its outlook on Chi Mei, the nation’s second-largest flat panel maker, down to “negative” from “stable.”

“The outlook revision reflects our expectation that a sharp industry downturn, which was deepened by the global financial crisis, will continue to suppress Chi Mei’s profitability and weaken its credit protection measures,” Taiwan Ratings said in a report.

As there was no clear sign of a recovery in the upcoming two or three quarters, Taiwan Ratings said it may lower its long-term rating on Chi Mei as well.

The local ratings agency may take action if Chi Mei’s ratio of net debt to capital exceeds 50 percent or the company is unable to maintain its ratio of operational funds to net debt above 30 percent, the report said.

Chi Mei, based in Tainan, posted record third quarter losses of NT$4.2 billion (US$126.1 million) as panel prices plunged on oversupply and shrinking demand amid the economic turmoil.

Chi Mei’s earnings before interest, tax, depreciation and amortization margin dropped to 16.6 percent in the third quarter this year, from 32.8 percent in the second quarter.

The company’s adjusted ratio of net debt to capital rose to 43.8 percent at the end of September, from 39 percent during the same period last year.

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