Improving demand cuts HannStar's quarterly losses

By Lisa Wang  /  STAFF REPORTER

Thu, Feb 16, 2006 - Page 10

Flat-panel maker HannStar Display Corp (瀚宇彩晶) said yesterday that its quarterly losses shrank as prices picked up on improving demand.

The company, which makes liquid-crystal-display (LCD) panels for computers, will become profitable this quarter, president Davie Chou (周定輝) told an investor conference yesterday.

"As long as the price for the mainstay 19-inch computer monitors is likely to drop less rapidly to cap at US$150 apiece, HannStar will be able to eke out profits in the first quarter," Chou said, adding that the company's costs were well-above that level.

The 19-inch computer panels made up a 65 percent share of the company's total sales last quarter, according to the company.

HannStar yesterday posted net losses of NT$1.2 billion (US$37.09 million), or NT$0.19 per share, for the fourth quarter of last year, an improvement from NT$1.77 billion in losses in the same period in 2004.

Excluding the non-operating losses of NT$1.59 billion, largely due to the reduction in the conversion price for its US$150 million overseas bonds, HannStar recorded its first operating income of NT$491 million in six quarters.

Operating margin returned to a positive 7 percent, it said.

Chou expects LCD panel prices for computers and TVs to fall by 10 percent in the first three months of this year from US$163 per unit last quarter.

The unit price was US$141 in the fourth quarter of 2004, HannStar said.

Despite the improving profitability, the company's slow progress in planning for the next generation of TV panels has been a serious concern for investors.

HannStar is the only one of Taiwan's top five LCD industry players without next-generation facilities for TV panels.

"Without aggressive efforts to map out capacity for TV panels, we feel HannStar will start to drop out of the market," said Eric Lin (林宜正), who tracks the LCD industry for Yuanta Core Pacific Securities (元大京華證券).

Lin said he would downgrade the stock to "hold" from "buy" with a target price of between NT$7 and NT$8.

HannStar shares have dropped 12 percent since the beginning of this year to yesterday's closing price of NT$6.76 on the Taiwan Stock Exchange.

HannStar said yesterday that it would not resume construction of a next-generation plant in southern Taiwan until its TV brand takes shape. It also lowered capital spending for this year to NT$7.5 billion, down 38 percent from NT$12.1 billion last year.

HannStar posted losses of NT$9.55 billion last year, or NT$1.65 per share, according to a statement. That was a reversion of earnings of NT$2.5 billion for 2004, according to the statement HannStar filed with the Taiwan Stock Exchange.

Revenues for last year, however, jumped almost 50 percent to NT$62.37 billion from a year ago.