Fri, Feb 10, 2012 - Page 12 News List

High component costs cut into lens maker’s earnings

HANDSET LENSES:The firm expects 8MP lenses to be its main revenue driver this year. It has also started designing 13MP lenses for select clients

By Jason Tan  /  Staff Reporter

Largan Precision Co (大立光), Taiwan’s largest manufacturer of handset lenses, yesterday said it posted weaker profit and margins in the fourth quarter owing to higher sourcing costs for a key component.

The firm made a profit of NT$1.16 billion (US$39.4 million), or NT$8.65 per share, in the fourth quarter, down 33.6 percent from the previous quarter.

However, on a year-on-year basis, profit was up 4.5 percent.

Gross margin plunged to a record low of 39.73 percent, from 41.22 percent in the third quarter, and 40.53 percent a year ago, according to a company statement.

Chief financial officer Charles Chiu (邱東泉) told an investor conference that although high-end 8 megapixel (MP) lenses accounted for 40 percent of total revenue in the fourth quarter — from 20 percent in the third — the use of voice coil motors (VCM) in 8MP lenses eroded profitability.

The company — whose customers include Apple Inc, Research in Motion Ltd and HTC Corp (宏達電) — sourced VCMs, one of three auto-focus actuator technologies used in camera lenses, from outside makers and then assembled them with its own lenses. That drove up production costs and affected margins.

Revenue in the fourth quarter was NT$4.01 billion, down 8.69 percent from the previous quarter, but a jump of 46.35 percent from the same period a year ago.

For the whole of last year, profit grew 28.51 percent to NT$5.2 billion, or earnings of NT$38.75 per share.

Total revenue last year jumped 29.41 percent to NT$15.98 billion.

CEO Adam Lin (林恩平) forecast that revenue for the current quarter would remain flat compared with the same period last year, when it was NT$2.97 billion, or drop from the fourth quarter last year because of seasonal factors.

Chiu added that margins would fall, given the trend of declining average selling prices in the industry.

Largan has started to design 13MP lenses for select clients, Lin said, but 8MP lenses are still expected to be the main revenue driver this year.

Last year, 5MP lenses contributed 50 percent to Largan’s total revenue, while 8MP lenses supplied 20 percent, with VGA and 3MP lenses making up the remainder.

Answering investors’ questions on how Largan would position itself in China, a booming market for low-end smartphones, Lin said many of its Chinese clients had adopted 5MP or more advanced lenses for their smartphones.

This emerging trend could be a boon for the company’s bottom line, he said.

Largan closed down 1.3 percent at NT$685 on the TAIEX yesterday, before earnings were released.

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