Tue, May 01, 2018 - Page 12 News List

Delta Electronics upbeat about this quarter after losses due to price cuts

By Ted Chen  /  Staff reporter

Delta Electronics Inc (台達電), the nation’s leading power and thermal solutions provider, expects quarterly profit to increase this quarter following a decline in the first three months of this year.

Net income last quarter fell about 28 percent annually to NT$2.8 billion (US$94.58 million) from NT$3.9 billion, the company said.

Earnings per share were NT$1.07, compared with NT$1.51 a year earlier, it said, adding that consolidated sales during the period rose 4 percent to NT$50.9 billion from NT$48.9 billion.

Continued price erosion, in particular for PC power modules, was to blame, Delta chief executive officer Cheng Ping (鄭平) told an investors’ conference.

Flagging demand for smartphones and component shortages were also causes for the profit decline, Cheng said.

A smaller top line and lower capacity utilization last quarter led to a sharp increase in operating expenses, which rose to 20.1 percent of sales, compared with 17.6 percent in the final quarter of last year and 19.1 percent a year earlier, the company said, adding that efficiency gains from industrial automation (IA) helped contain further declines in profit.

Gross profit margin fell to 25.6 percent at the end of last month, from 27.2 percent a year earlier, while operating margin fell to 5.5 percent from 8.1 percent, the company said.

“Although demand for PCs and smartphones is expected to remain soft this quarter, we are not pessimistic about growth in the company’s other businesses, which should propel gross margin back to the 27 to 28 percent level,” Delta chairman Yancey Hai (海英俊) said.

While the company is transitioning to higher-margin markets, such as industrial automation, it has been hit hard by faster-than-expected price erosion in PC power modules, its biggest business unit, Hai said.

Hai described the cutthroat pricing competition by its PC power module rivals as irrational and unsustainable, but added that equilibrium should return this year, as smaller suppliers are consolidated by their bigger peers.

Passive module makers would not be able to bank on shortage-driven windfalls for long, he added.

The company would continue its efforts to break into the lucrative IA solutions market, a segment in which the firm has been posting annual growth of about 15 percent, Cheng said.

“We are looking to sell branded IA solutions,” Cheng said, adding that building brand recognition takes time and the firm is sticking to its plans, despite a drop in its stock price.

The company has made headway in providing a complete IA solution for a production line for a Japanese client, Cheng said.

Sales contribution from automation last quarter rose 26 percent annually to NT$8.82 billion, accounting for 17 percent of sales during the period, up from 14 percent a year earlier, the company said.

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