LCD panelmaker AU Optronics Corp (AUO, 友達光電) yesterday reported that its first-quarter net profit dropped more than half on weaker-than-expected TV demand from China due to excess inventory.
Despite an unfavorable pricing environment, AUO still posted an operating profit of NT$2.95 billion (US$99.3 million) in the first three months of the year, outperforming bigger South Korean rival LG Display Co, which unexpectedly posted a net loss of 49 billion won (US$44.5 million).
“Demand cooled off in the first quarter, which was, as usual, a slow season,” AUO chairman and chief executive officer Paul Peng (彭双浪) told investors. “However, AUO performed relatively well as its efforts to boost its products’ value bore fruit. The quarterly [operating] profit matched our expectations.”
The company delivered a better earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 16 percent last quarter, compared with LG Display’s 14 percent.
Television sales at the end of last year and during the Lunar New Year fell short of television vendors’ expectations in China, which resulted in a bigger-than-expected inventory pileup, Peng said.
AUO expects its clients to complete their inventory digestion this quarter and for TV panel demand to pick up next quarter, Peng said.
“We are confident about orders in the second quarter. Customer demand is warming up,” Peng said, adding that the currency exchange rate and US-China trade dispute pose downside risks for the company.
AUO’s gross margin shed 1.5 percentage points to 10.9 percent last quarter due to the 2.6 percent rise in the New Taiwan dollar against the greenback, he said.
Shipments of large-sized panels, mainly for TVs, are expected to drop by a low single-digit percentage point this quarter from last quarter’s 28.6 million units, the company said.
AUO expects factory utilization to remain high at 95 percent.
Average selling prices are to remain flat in US dollar terms, the company said.
AUO reiterated its forecast that global flat-panel supply and demand would largely be balanced this year.
Global panel demand is forecast to grow at an annual rate of between 6 and 8 percent this year, while supply growth would be contingent on how fast Chinese makers improve their yields, it said.
During the quarter ending March, net profit plunged 54 percent to NT$4.31 billion, compared with NT$9.44 billion in the same period last year.
On a quarterly basis, net profit edged up 2.7 percent from NT$4.2 billion, aided by an asset disposal gain of NT$1.19 billion and unspecified tax credits.
Operating profit fell about 75 percent year-on-year from NT$12.02 billion and down 48 percent quarter-on-quarter from NT$5.7 billion.
The average selling price shrank 13.78 percent annually or 2.68 percent quarterly to US$363 per square meter, the company’s financial statement showed.
AUO plans to spend NT$45 billion on new facilities and equipment this year.
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