AU Optronics Corp (AUO, 友達光電), the nation’s No. 2 flat-panel maker, yesterday posted its strongest quarterly net profit in two years as prices rose on the back of a recovery in demand. However, growth could slow this quarter because of excess inventory at its Chinese customers, it said.
With demand slowing, AU Optronics expects its equipment loading rate to fall to between 90 and 92 percent this quarter, compared with about 97 percent in the second quarter.
“Our strategy is to adjust [capacity] in accordance with customer demand. We will cut capacity if demand drops,” company CEO Chen Lai-juh (陳來助) told an investor conference.
“I believe the industry will remain healthy in the second half if we adjust the loading rate to cope with [customers’] inventory digestion,” Chen said.
In the April-June quarter, AU Optronics’ net profit surged 54.6 percent to NT$11.25 billion (US$350.8 million), from NT$7.27 billion in the first quarter, hitting its highest level since the second quarter of 2008.
“The company’s second-quarter net income has greatly exceeded my expectations, and I am already an optimist,” said Roger Yu (游智超), a flat-panel industry analyst with Polaris Securities Co (寶來證券).
Yu had expected AU Optronics to earn NT$10.5 billion.
Gross margin improved to 15.8 percent this quarter from 12.8 percent last quarter and 1.4 percent a year ago, helped by growing shipments of higher-priced LED panels, the panel maker said.
The panel maker lost NT$6.6 billion in the second quarter of last year as the global recession affected electronics purchases.
For this quarter, “we still expect seasonal demand [to lift sales] ... Inventory digestion could shrink to about one month, compared with three to four months before the financial crisis,” said Paul Peng (彭雙浪), an executive vice president at AU Optronics.
“Only Chinese customers are facing the issue of excessive stockpile,” Peng said.
Chinese TV customers have built up an inventory in excess of two weeks as TV sales during the Labor Day shopping season fell short of expectations, Peng said.
Chen expects Chinese demand to pick up in September, when buyers start building inventory again for the National Day holiday shopping spree beginning on Oct. 1.
For the full year, AU Optronics expects about one-third of its shipments to go to China.
This quarter, shipments of TV and PC panels are expected to grow by a high single digit percent from 29.6 million units, it said.
The average selling price (ASP) for TV panels is expected to rise slightly this quarter, after a 24 percent year-on-year increase to US$247 per unit in the second quarter. The ASP for PC panels is forecast to drop slightly from US$68 in the second quarter, it said.
The ASP for TV panels jumped 24 percent year-on-year, or 2 percent quarter-on-quater, to US$247 per unit in the quarter ending June 30.
“I think there is uncertainty about demand and gross margin downside in the third quarter,” Yu said. “We are still concerned if excess inventory will drop as the company expects.”
Separately, AU Optronics said it planned to spend NT$400 billion to build two next-generation LCD plants and two solar plants in central Taiwan from next year to 2012, rather than the four LCD factories originally planned.
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