Thu, Nov 05, 2015 - Page 13 News List

Restructuring leaves TPK in the red

IMPAIRED ASSETS:The touchpanel maker wrote down NT$18.97 billion, mainly from idle equipment, as lackluster notebook demand affected its factory utilization rate

By Lisa Wang  /  Staff reporter

TPK Holding Co chairman Michael Chiang tells a press conference in Taipei yesterday that the company posted a third-quarter loss of NT$19.39 billion.

Photo: CNA

TPK Holding Co (宸鴻), a major supplier of touchpanels for Apple Inc’s iPhone 6S and Watch, yesterday reported a quarterly loss of NT$19.39 billion (US$595 million) due to massive asset impairments.

The company said it is undertaking a drastic restructuring as lackluster demand for touchscreen notebook computers has affected its factory utilization rate, leaving some of its equipment idle.

TPK posted NT$18.97 billion in impaired assets last month, mainly from unprofitable and idled equipment.

Net loss last quarter was about six-fold its share capital of NT$3.2 billion.

“We are refocusing on core technologies and [profitable] products. We are refocusing on our major customers. To do so, we have to make some adjustments,” TPK chairman Michael Chiang (江朝瑞) told investors. “This is something we have to do to return the company to health.”

Without the burden of money-losing equipment, TPK expects to add NT$2.09 in earnings per share to its bottom line this quarter. Earnings for next year could get an extra additon of NT$7.98 per share as the company plans to cut operating costs by NT$800 million this quarter and by NT$3.28 billion next year, the company said.

TPK said the asset impairment would not affect the company’s cash position, which stood at NT$27.22 billion as of the end of last quarter.

The company yesterday reported a 9.1 percent increase in revenue to NT$14.05 billion last month, from NT$12.88 billion in September.

To assure investors, TPK’s board yesterday approved a share buyback program. TPK is to repurchase 20 million shares, or 5.7 percent of its total outstanding shares, at NT$64 to NT$135 a share over a two-month period starting today.

Excluding the one-time asset write-down, TPK swung into a net profit of NT$164 million last quarter, from losses of NT$618 million in the second quarter.

TPK counts Apple Inc and Microsoft Corp as two of its major clients, with Apple contributing 56 percent of the company’s total revenue last quarter, up from 36 percent a quarter ago.

Its gross margin improved to 8.8 percent last quarter, from 2.1 percent in the second quarter.

The quarterly profit fell short of HSBC Securities Corp’s estimate of NT$679 million and CIMB Securities Ltd’s estimate of NT$700 million.

For this quarter, TPK said that it aims to increase revenue by 5 percent from last quarter’s NT$34.24 billion, supported by robust demand for notebook computers equipped with Microsoft’s Windows 10 operating system.

CIMB yesterday cut its revenue forecast for TPK this quarter to a 5-percent increase quarter-on-quarter from an earlier estimate of 26 percent growth, citing the seasonal decline of Apple orders and the consolidation in its client base.

"To factor in lower depreciation expense thanks to asset write-offs, we forecast fourth-quarter EPS of NT$4.5 on the back of 4.9 percent operating margins," CIMB analyst Eric Lin (林育名) said in a note.

But there is a potential downside risk if TPK further writes off its financial exposure on its touchpanel subsidiary Cando Co (達鴻), which is equivalent to around NT$4.6 per share, Lin said.

TPK said it is considering whether to sell its shareholding in loss-making Cando.

TPK holds about 20 percent shares in Cando, which has been struggling to make a profit and is facing cash crunch due to falling touchpanel demand.

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