Fri, Aug 19, 2011 - Page 12 News List

Delta’s quarterly earnings plunge to two-year low

By Lisa Wang  /  Staff Reporter

Delta Electronics Inc (台達電), the world’s top manufacturer of switching power supplies, yesterday reported its weakest quarterly net profits in about two years because of higher taxes and losses from its solar business.

Net income plunged 46 percent year-on-year to NT$2.56 billion (US$88.3 million) last quarter, its lowest since the first quarter of 2009, from NT$4.76 billion a year ago, Delta’s financial statement showed. On a quarterly basis, second-quarter net profits fell almost 18 percent from NT$3.11 billion.

SUBSIDIARY’S LOSSES

The Taipei-headquartered company reported NT$344 million in losses from minority interests last quarter, mainly because its solar cell and module arm, DelSolar Co Ltd (旺能光電), slid into red as solar panel prices plummeted.

The company also paid NT$1.03 billion in business income taxes last quarter, sharply up from NT$426 million in the first quarter, its financial datea showed. The company enjoyed a tax break of NT$61 million in the same period last year.

This quarter, revenues are expected to grow by a single-digit percentage from last quarter’s NT$43.7 billion (US$1.51 billion), below seasonal growth of 10 percent quarter-on-quarter over the past years, vice chairman and chief executive Yancey Hai (海英俊) told investors, joining many high-tech heavyweights in predicting a below-seasonality outlook for the third quarter.

“The third-quarter pattern is different from before. Customers placed orders ahead after the March 11 earthquake in Japan. However, the impact [on component supply] was not as big as people feared,” Hai said.

Growth would mainly come from power management systems used in servers on growing cloud computing networks and components used in industrial automation products, such as inverters and converters, while demand from PCs would be little changed, Hai said.

Delta supplies power adapters for use in notebook computers produced by to Hewlett-Packard Co and Apple Inc, as well as other major PC brands.

As the wobbling US economy and the eurozone debt crisis looked ready to cap private consumption, Hai said Delta recently activated a mechanism, which the company adopted during the last financial crisis, to cope with uncertainties.

LOW VISIBILITY

“Fourth-quarter visibility is unclear,” Hai said. “We have to secure more orders and reduce expenses by cutting direct labor and travel allowances.”

This year, Delta plans to trim 10 percent of its 60,000-strong Chinese workforce by using more machines, with the aim of reducing profit erosion caused by rising wages in China, Hai said.

Hai said the company would reduce production of low-margin products in favor of higher-margin products, after Delta’s gross margin dipped to a two-year low of 19 percent last quarter.

Hai said Delta was in discussions with potential customers to supply slim adapters used in ultrabook notebook computers powered by Intel chips, adding that he expected the company to benefit from the new ultra-slim laptops in the short term.

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