Fri, Nov 10, 2017 - Page 11 News List

Compal’s net profit rises after erasing LeEco debt

SAVING THE YEAR:The firm is in talks with Lenovo to sell its stake in Lienpal, which would help offset losses from LeEco if completed before the end of next month

By Lisa Wang  /  Staff reporter

Compal Electronics Inc (仁寶), one of Apple Inc’s iPad assemblers, yesterday said net profit growth got back on track last quarter after shrugging off bad debt owed by Chinese client Leshi Internet Information and Technology Corp (LeEco, 樂視).

Net profit last quarter rose 7 percent to NT$2.32 billion (US$76.87 million), compared with NT$2.18 billion a year earlier, company data showed.

That represented a spike from NT$254 million in the second quarter, when Compal booked a NT$2.9 billion write-off due to LeEco debt.

Gross margin dropped to 3.4 percent, compared with 3.7 percent in the second quarter and 4.4 percent in the third quarter last year, as higher sourcing costs for flat panels and memory chips cut into the firm’s margin, the data showed.

In a bid to bolster profitability this year, the firm is in intensive talks with Lenovo Group Ltd (聯想) to sell Compal’s 49 percent stake in electronics manufacturing venture Lienpal Ltd (聯寶), Compal chairman Ray Chen (陳瑞聰) said yesterday.

“Lenovo is willing to buy Lienpal shares from us. We are entering the final talks and expect to close the equity sale in the first quarter of next year at the latest,” Chen said, but added that the firm hopes “to complete the transaction by the end of next month, as the asset disposal gain would help offset losses from LeEco.”

Compal invested about US$150 million in Lienpal, and Lenovo has the option to buy its stake for no more than US$750 million under the terms of the agreement they inked in September 2011.

Chen declined to disclose detailed financial figures for the equity sale.

However, he reassured investors that the deal would not undermine Compal’s partnership with Lenovo, saying that it would continue to be a major laptop and server assembler for the Chinese firm.

Without the noise caused by LeEco, Compal is to refocus operations on market fundamentals and expects laptop shipments this quarter to be flat, or fall by a single-digit percentage quarter-on-quarter, Chen said.

Shipments of “smart” devices are to grow 20 percent quarterly this quarter, he said.

Overall, gross margin is to remain steady this quarter, as raw material costs are stabilizing, he added.

He forecast that the company’s laptop shipments next year will likely grow mildly, outpacing the overall industry’s zero growth.

Non-PC segments will grow faster than the laptop segment next year, with the strongest growth expected in tablets, wearables and Internet of Things devices, Chen said, citing market share gains.

Non-PC segments have accounted for 35 percent of Compal’s overall shipments this quarter, while laptops account for 65 percent, he added.

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