Fitch Ratings yesterday raised its outlook on AU Optronics Corp (友達光電), the world’s third-biggest maker of liquid-crystal-display (LCD) panels, to “stable” from “negative” because improving profitability has helped strengthen the company’s ability to repay debt.
“Fitch has changed its forecast for AU Optronic’s operating results and credit measurements over the medium-term, because AU Optronics has shown significant improvement in profitability since the second quarter of 2009,” Fitch Ratings analyst Kevin Chang (張崇仁) said in a report.
AU Optronics improved its earnings margin before interest, tax, depreciation and amortization (EBITDA) to 27.9 percent last quarter, compared with 21.5 percent in the second quarter after returning to positive 1.7 percent in the first quarter of this year.
“This effectively turned its earnings before interest and tax positive for the first time since the fourth quarter of 2008, enhancing the company’s debt service capability,” Chang said.
This year as a whole, AU Optronics, however, would still see negative cash flow from its operations, Chang said.
The panel maker has posted minus NT$24.83 billion (US$771.9 million) in net cash in the first nine months of this year, the company’s financial statements on its Web site showed.
In terms of revenue, Chang said he expected AU Optronics to resume growth next year, as the recovering global economy may spur demand for TVs and laptop computers in emerging markets and developed countries.
This year, AU Optronics may see revenues decline at a slower pace of between 15 percent and 20 percent year-on-year on falling panel prices, rather than the 30 percent to 40 percent contraction estimated by the agency six months ago, the report said.
AU Optronics posted NT$423.93 billion in revenues last year.
Supporting Chang’s positive outlook for the LCD industry, Taipei-based researcher WitsView said global PC and TV panel shipments increased 4.3 percent month-on-month, or 74.2 percent year-on-year, to 49.53 million units last quarter, far better than its previous estimate of a flat November.
“Improving retail sales during the Thanksgiving and Christmas holidays in the US and Europe and growing demand in China has helped boost the LCD industry,” WitsView said in a press release. “This conventional slack season doesn’t look slow at all.”
Shares of AU Optronics jumped 2.02 percent to NT$35.4, out-performing the benchmark TAIEX, which rose 1.53 percent yesterday. Smaller rival Chi Mei Optoelectronics Corp (奇美電子) dropped 0.24 percent to NT$20.75.
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