TPK Holding Co (宸鴻), which supplies touch panels for Apple Inc’s iPhones and Apple Watches, yesterday posted stronger-than-expected net profit for last quarter, benefiting from increased demand as clients launched new products.
Net profit totaled NT$684 million (US$21.67 million) in the quarter ended Sept. 30, reversing a loss of NT$2.5 billion in the second quarter, a TPK financial statement showed. Earnings per share improved to NT$1.97, from minus-NT$7.28 in the prior quarter.
Demand came back as customers finished inventory digestion and placed more orders ahead of new product launches, which helped boost factory utilization well above the break-even point, TPK said. Shipments of touch panels used in smartphones and wearable devices surged 1.8-fold last quarter from a quarter earlier.
Apple, TPK’s No. 1 client, launched its iPhone 7 and new Apple Watch devices in early September.
“The third-quarter results are better than our expectations,” TPK chief executive officer Michael Chung (鍾依華) told an investors’ teleconference.
Operating margin soared to 4.9 percent last quarter, hitting a three-year high, Chung said.
Last quarter’s figure also surpassed the company’s estimate of 2 percent.
In the prior quarter, operating margin was minus-16.1 percent.
TPK attributed the improvement to better management of labor costs following a 10 percent headcount cut and better manufacturing efficiency.
Gross margin also returned to positive territory at 9.6 percent last quarter, compared with minus-9.3 percent in the second quarter.
“The fourth quarter is a high season. The company will cope with customers’ seasonally [high] demand and new product launches to [increase] shipments,” Chung said.
As a result, TPK expects revenue to be a flattish this quarter, compared with NT$26.17 billion last quarter.
Profit this quarter will be similar to last quarter, TPK chief financial officer Freddie Liu (劉詩亮) said.
Apple accounted for more than 50 percent of TPK’s revenue in the third quarter, up from 36 percent in the second quarter.
The company is also confident regarding its financial performance in the first half of next year, as new product launches by clients are tipped to offset cutbacks in customer demand during the slow season, TPK said.
TPK saw significant losses in the second quarter, as Apple had to digest excessive inventory and cut orders due to a decline in iPhone sales.
Sales of iPhones shrank 7.7 percent annually to 44.4 million units in the second quarter, according to Gartner Inc’s tally released in August.
“End demand for consumer products plunged at an unprecedented pace in the first half of this year. We do not expect the decline to be that drastic in the first half of 2017,” Liu told investors. “Demand looks okay.”
Liu said he was confident the company would eke out a profit in the first half of next year and reach the goal of maintaining operating margin at about 3 percent in low seasons.
With global smartphone vendors such as Apple likely to equip their next-generation smartphones with advanced organic LED (OLED) panels, Chung said TPK would benefit, as in-cell touch sensors are not suitable for use with OLED panels.
TPK does not provide in-cell touch sensors.
Commenting on the possibility of smartphone makers discontinuing the use of a home key, Chung said the company was optimistic regarding the possibility.
TPK is developing a new touch technology, dubbed “on-glass fingerprint,” to cope with future demand, he said.
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