Fri, Jul 24, 2009 - Page 12 News List

AUO expecting profits driven by China demand


AU Optronics Corp (AUO, 友達光電) yesterday posted its smallest quarterly loss in nine months on rebounding demand for televisions, primarily from China, and said it may return to profitability this quarter.

AUO, the world’s No. 3 flat-panel maker, said it would step up capacity expansion, including restarting construction of its second advanced eighth-generation (8G) plant in central Taiwan to cope with growing demand for TVs.

The company also raised capital spending by around 25 percent to NT$75 billion (US$2.29 billion) for this year, from a previous estimate of NT$60 billion, to support capacity expansion at its existing 8.5G and 7G plants.

During the April-June period, AU Optronics lost NT$6.6 billion, from a NT$20.22 billion loss in the first quarter, as prices bounced back on better demand. The Hsinchu-based liquid-crystal-­display (LCD) panel maker earned NT$20.39 billion in the second quarter of last year.

“The second quarter [this year] was a very hot season, as Chinese shopping groups and customers necessitated increased supply. It was very different from last year,” AUO vice president Paul Peng (彭雙浪) said, citing better-than-expected sales of TV sets in major markets such as China, the US and Europe.

Peng said the recovery would gain force during the current quarter.

“We are unable to fully satisfy customer demand. We can only supply 80 percent of orders,” Peng said.

The recovery may help boost panel prices by another 10 percent or 15 percent in the July-­September period from the US$789 per square meter they reached after an increase of nearly 7 percent last quarter, AUO said.

The price increase in the second quarter helped AUO’s gross margin return to positive territory, or 1.4 percent, for the first time since the final quarter of last year.

Building on the upbeat outlook, AUO chief executive Chen Lai-juh (陳來助) said: “I’m confident that AUO will be profitable in the third quarter ... and we are not seeing any adverse factors in the fourth quarter.”

Yuanta Securities (元大證券) analyst Dale Gai (�?s) said AUO had beat most analysts’ expectations by posting a smaller-than-expected quarterly loss for the second quarter, and it may again report higher earnings than his earlier estimate of NT$4.26 billion this quarter on the back of faster growth in shipments.

AUO said shipments of PC monitor and TV panels were likely to rise by between 15 percent and 20 percent to a record high this quarter, compared with 22.4 million units in the second quarter, AUO said.

“We are also impressed with AUO’s ability to minimize the negative impact of glass substrate supply constraints on its shipments,” Gai said.

He gave a “buy” rating on AUO.

AUO said insufficient supplies of glass substrates would curtail shipments by no more than 5 percent this quarter.

Shares of AUO rose 0.39 percent to NT$38.20 yesterday, compared with a target price of NT$43 set by Gai.

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