Innolux Corp (群創), the LCD panel manufacturing arm of Hon Hai Precision Industry Co (鴻海精密), yesterday posted its strongest quarterly net profits in seven years, benefiting from the industry’s longest boom cycle.
Net income expanded about 9 percent to NT$11.86 billion (US$391.9 million) last quarter, compared with NT$10.87 billion in the final quarter of last year, the company said in a financial statement.
The Miaoli County-based company posted a loss of NT$8.58 billion in the first quarter last year.
Gross margin rose to 23.6 percent, the highest since 2010, compared with 22.2 percent a quarter earlier and minus-7.2 percent in the same period last year, which it attributed to a 5.2 percent quarterly increase to US$399 per square meter for flat panels. That was an annual jump of 34 percent.
Given improving profitability and a net debt-to-equity ratio of close to zero, Innolux increased its payout ratio from 30 percent to 52 percent this year, company chairman Wang Jyh-chao (王志超) told an investors’ conference yesterday.
The board of directors approved the distribution of a cash dividend of NT$0.1 per common share based on last year’s earnings per share of NT$0.19.
Aside from strong financial performance, investors concentrated on the panelmaker’s potential partnership with Sharp Corp in TV manufacturing and new display technologies after Hon Hai acquired a 66 percent stake in the Japanese electronics giant last year.
“This is the first year we are resuming our TV assembly business [for Sharp and other brands]. It is just the beginning. We will see how it goes,” Wang said.
To facilitate the partnership with Sharp, Robert Shiao (蕭志弘), who was in charge of TV manufacturing, was promoted to president in March.
Innolux would benefit from Hon Hai’s plan to build a new panel factory in the US, if the plan is finalized, Wang said without elaborating.
Innolux is also complementary to Sharp in terms of product portfolio, Wang said.
“Sharp is good at producing 45-inch, 60-inch and 70-inch panels, while Innolux specializes in making 40-inch, 50-inch, 65-inch and 70-inch panels,” he said.
Wang said that the supply and demand equilibrium would only be tilted by Chinese panelmakers’ aggressive capacity expansion if they overcome technological barriers to ramping up 10.5G fabrications.
Beijing is becoming increasingly conservative about subsidies for panelmakers, he said.
In the short term, Innolux expects shipments of TV and PC panels to increase by a high-single-digit percentage this quarter from last quarter.
Average selling prices for TV and PC panels this quarter are expected to drop by a low-single-digit percentage from last quarter, the company said.
Innolux expects strong seasonal demand in the second half, supported by recovering demand from Chinese TV makers and continuing strong TV replacement demand in emerging markets.
In addition, the company expects a strong New Taiwan dollar to cut revenue by 4 percent this quarter, as it expects the local currency to continue making gains against the US dollar.
However, foreign-exchange losses affecting its gross margin would be offset by stable panel prices and lower depreciation costs, it said.
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