Wed, Nov 13, 2019 - Page 12 News List

Yageo seeks leverage via acquisition

‘CREAM OF THE CROP’:The acquisition of Kemet is the last piece of Yageo’s MLCC portfolios to break into automotive and industrial devices, Yageo’s chairman said

By Lisa Wang  /  Staff reporter

Yageo Corp chairman Pierre Chen, right, speaks at a news conference in Taipei yesterday following the company’s conference call, as chief operating officer David Wang looks on.

Photo: Tu Chien-jung, Taipei Times

Yageo Corp (國巨) yesterday said its US$1.64 billion acquisition of Kemet Corp would help it break into the high-end automotive, industrial and 5G components segments.

The deal is expected to boost the company’s net profit by at least 80 percent and double its revenue to about US$3 billion when it is completed in the second half of next year, the world’s third-largest supplier of multilayer ceramic capacitors (MLCC) told a media briefing in Taipei.

It announced earlier in the day that it would acquire all of Kemet’s common shares at US$27.2 per share in an all-cash transaction.

Yageo has entered a definitive agreement with Kemet and the transaction has been approved by both companies’ board of directors, it said.

“The acquisition of Kemet helps Yageo find the last missing piece of its MLCC portfolios in automotive and industrial devices, which are dominated by European and Japanese suppliers,” Yageo chairman Pierre Chen (陳泰銘) said.

“Yageo has been squeezing profits by boosting volumes and improving [operational] management in the past. Now, the company finally gets the chance to have a taste of the cream of the crop,” he said.

Despite having a 2 percent share of the global MLCC market, Kemet generated almost the same level of annual revenue as Yageo, indicating that the US company delivered average selling prices that are 20 times higher than Yageo’s, Chen said.

Yageo has a 13 percent share of the global market.

Kemet also has great exposure to MLCCs used in 5G base stations, an area with rapid growth potential, he said.

The acquisition would play a crucial role in Yageo’s growth over the next five to 10 years, Chen said.

With diverse product lineups and technology, Yageo would be better prepared to weather industry downturns and keep its bottom line stable, he said.

Commenting on the company’s outlook, Chen said inventories have been falling faster than expected, “which is a strong sign that demand is shaping up well.”

Yageo expects inventory turnover of finished goods to drop to fewer than 60 days this quarter, from as high as 170 days, he said.

Last month, the company raised its business outlook and said inventory turnover would fall to 70 days this quarter.

Yageo has lowered factory utilization to 25 percent over the past three quarters to cope with excess inventory, Chen said.

It would take time to raise utilization from that level, given labor shortages in China, he said.

The company expects to return to growth in annual revenue in the first quarter of next year, if labor recruitment goes smoothly.

Yageo said net profit last quarter grew 5 percent to NT$2.04 billion (US$67.06 million), compared with NT$1.42 billion in the second quarter.

On an annual basis, net profit plunged almost 86 percent from NT$14.5 billion.

Earnings per share rose to NT$4.81 from NT$3.34 a quarter earlier, but declined from NT$34.35 a year earlier.

Gross margin dropped to 31 percent from 32.6 percent in the second quarter and 69.3 percent in the third quarter of last year, the company said.

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