Thu, Jun 06, 2019 - Page 12 News List

Yageo cautious as trade dispute hits utilization

By Lisa Wang  /  Staff reporter

Yageo Corp (國巨), the world’s largest passive components supplier, yesterday gave a conservative outlook for the next one-and-a-half years, as consumer confidence took a hit from intensifying US-China trade tensions.

The dispute between the world’s two biggest economies has escalated to a level that has exceeded the company’s expectations, the Chinese-language China Times said yesterday in a report on the company.

Yageo’s factory utilization has plummeted to between 30 and 40 percent amid plunging demand, chief executive officer Dora Chang (張綺雯) said at yesterday’s annual shareholders’ meeting, it said.

Slumping end product demand has resulted in an inventory buildup at its distributors and customers, and the company’s goal is to help reduce inventory in the supply chain to between five and six months, the report said.

Order visibility for the third and fourth quarters is vague, Chang told shareholders, adding that business would remain bumpy next year.

Yageo plans to suspend capacity expansion for average passive components at a new Kaohsiung plant, which is focused on high-end products, the report said.

The company plans to invest NT$16.5 billion (US$525.65 million) in the Kaohsiung plant, which is expected to be completed within three years at the earliest, the report said.

The US’ 25 percent tariffs on Chinese goods would have a limited effect on Yageo, as the company’s exports to the US are not huge, the report quoted Yageo chairman Pierre Chen (陳泰銘) as saying.

Yageo’s China operations account for between 70 and 75 percent of the company’s total manufacturing capacity, while its Taiwanese plants make up the remainder, the report said.

Shareholders approved a proposal to distribute a cash dividend of NT$45 per common share, representing a payout ratio of 56 percent based on the company’s earnings per share of NT$80.3 for last year.

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