Mon, Oct 10, 2011 - Page 11 News List

Flat-panel makers report fall in sales

DOWNWARD SPIRAL:Amid a supply glut, AU Optronics and Chimei have been selling their products at prices lower than production costs, but demand is still lagging

Staff Writer, with CNA

Chimei Innolux Corp (奇美電子) and AU Optronics Corp (AUO, 友達光電), two of the nation’s leading flat-panel makers, reported a decline in sales for last month because of falling product prices.

Chimei Innolux said on Friday it posted NT$41.47 billion (US$1.36 billion) in consolidated sales last month, down 1.3 percent from August and down 9.1 percent from a year earlier.

AUO recorded NT$32.92 billion in consolidated sales last month, down 1.1 percent from a month earlier and down 21.6 percent from a year ago.

In the third quarter, Chimei Innolux’s sales totaled NT$124.70 billion, up 2.5 percent from the second quarter, while AUO’s revenue was up 0.9 percent from the previous quarter at NT$98.93 billion.

According to market researcher DisplaySearch, prices of LCD monitors and panels for notebook computers remained flat early this month, but TV screens faced downward pricing pressure.

DisplaySearch said flat-panel makers have been selling products at prices below production costs and such pressure is mounting amid a supply glut.

Grand Cathay Investment Service Corp (大華投顧) agreed, saying that TV panel prices fell 13 percent during August and last month, and continued to weaken this month.

FURTHER LOSSES

Chimei Innolux and AUO may incur further losses under such unfavorable circumstances, Grand Cathay said.

In the first half of this year, AUO incurred a net loss of NT$24.66 billion, compared with NT$18.52 billion in net profit a year earlier, while Chimei Innolux posted a NT$27.05 billion net loss, compared with NT$13.34 billion in net profit a year ago.

In addition to the impact from falling product prices, Grand Cathay said, AUO may have to shoulder losses from its investments in the solar energy business overseas for the third quarter, while Chimei Innolux, which shipped more TV panels than AUO, is likely to report larger losses than its rival in the quarter.

DOWNTURN

Despite major LCD panel makers’ efforts to scale back their capital expenditure and lower capacity utilization, the extended industry downturn has prompted Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s Ratings Services, to lower Chimei Innolux’s credit ratings on concerns about the company’s profitability and cash flow into next year.

On Friday, Taiwan Ratings cut Chimei Innolux’s long-term and short-term corporate credit ratings to “twBBB/twA-3” from “twBBB+/twA-2,” the agency said in a statement. A cut in corporate ratings could increase the company’s borrowing costs.

“A prolonged industry downturn, which may extend significantly longer than our earlier expectation, is likely to constrain improvement in Chimei Innolux’s weak profitability and cash flow over the next two to three quarters,” the statement said.

At the end of June, the company had NT$74.2 billion in cash and liquid financial assets, with unused medium-term credit facilities totaling about NT$27.4 billion. The company has NT$69.5 billion of long-term debt due in one year, Taiwan Ratings said.

Chimei Innolux’s slow progress in reaping the synergy benefits of its three-in-one merger — in which Chi Mei Optoelectronics Corp (奇美電子), Innolux Display Corp (群創光電) and TPO Displays Corp (統寶光電) merged in March last year — was also cited by the ratings agency as a factor that restrains the company’s profitability over the next two to three quarters.

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