Thu, Aug 01, 2013 - Page 13 News List

AUO sees profit after 10 quarters of loss

REVENUE REBOUND:Despite beating most analysts’ quarterly profit targets, the panel maker gave a negative guidance for Q3 due to inventory correction and stagnant prices

By Lisa Wang  /  Staff reporter

AU Optronics Corp (AUO, 友達光電), the nation’s No. 2 LCD panel maker, yesterday posted its first quarterly profit in 10 quarters on the back of the strong demand for high-margin LCD TV panels seen in China before Beijing’s subsidy program expired in May.

In the quarter ending on June 30, AUO swung back to black with a net profit of NT$3.98 billion (US$132.5 million), or NT$0.43 per share, which exceeded most analysts’ estimates, including Fubon Securities Co (富邦證券) analyst Calvin Shao (邵琮淳).

Shao had expected AUO to post NT$0.30 in earnings per share and said that most analysts had forecast an even lower NT$0.10 a share.

“Favorable foreign exchange rates have helped AUO outperform most analysts’ expectation,” Shao said.

AUO said the depreciation of the New Taiwan dollar and the yen against the US dollar saw its gross margin gain as much 1.3 percentage points last quarter. Gross margin expanded to 10.3 percent last quarter from 4.8 percent in the first quarter and minus-4.3 percent a year ago, a company financial statement showed.

Shipments of 39-inch flat panels mostly for TVs and bigger screens accounted for 41 percent of AUO’s NT$112.34 billion revenue last quarter, up from 37 percent in the previous quarter and 26 percent a year ago.

However, the Hsinchu-based panel-maker gave a lackluster outlook for the current quarter, citing customers’ short-term inventory correction. It expects shipments of television and PC panels to be flat this quarter, compared with the 30.5 million units shipped in the April-to-June period. AUO also forecast that prices for both types of panels would remain unchanged, or see a slight sequential drop.

AUO president Paul Peng (彭雙浪) said demand began dwindling last month due to inventory correction.

“We did not see a significant difference from what we expected last quarter, or at the beginning of the year. It is just [a slowdown driven by] pipeline inventory correction, which should be short-term,” he added.

Chinese TV makers have piled up inventory for eight to 10 weeks, two weeks longer than usual, as demand for televisions in the country weakened after the government’s subsidy program expired, AUO said.

“The third quarter will not be a hot season as it usually is, but, conversely, the fourth quarter will not be as slow as it normally is,” Peng said.

Peng said he expects demand to rebound next month because of demand for inventory buildup for China’s National Day holiday in October and the New Year holiday shopping season in January, as well as the Thanksgiving and shopping seasons in theUS and Europe.

“We are concerned about the excessive stockpiling in China caused by Chinese TV makers overbuying panels in expectation that Beijing would launch a new subsidiary program,” Shiao said. “It looks like the growth momentum in the second half will be weaker than we originally thought.”

AUO’s net profit is expected to fall this quarter, based on the company’s guidance, Shiao forecast.

Separately, AUO said it has not set a timelime to resume construction of its 8.5G plant in Kunshan in China’s Jiangsu Province, though Chinese and South Korean peers are aggressively building 8.5G plants. AUO said the Chinese factory’s shell has been completed.

AUO stock dove 2.28 percent to NT$10.70, while bigger rival Innolux Corp (群創光電) fell 1.5 percent to NT$13.15 yesterday.

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