Innolux Corp (群創光電), the world’s No. 3 LCD panel maker, yesterday reported an 83 percent slump in net profit for last quarter, as demand plunged after the Chinese government ended a major subsidy for purchases of energy-efficient TVs.
Net profit plummeted to NT$685 million (US$23.3 million) last quarter, which includes about NT$1.49 billion in reserves for anti-trust lawsuits, compared with NT$4.07 billion in the second quarter, according to the company’s financial statement. Innolux lost NT$3.72 billion in the second quarter of last year.
The third-quarter earnings fell short of Credit Suisse analyst Jerry Su’s (蘇厚合) forecast of NT$1.82 billion. Su downgraded Innolux early this month to “neutral” from “buy.”
Innolux could post a quarterly loss of NT$394 million, Su said in a report released on Oct. 11.
“The company suffered the brunt of the Chinese government’s decision to end subsidies for TV purchases, as Innolux holds the biggest market share there,” Innolux chief executive officer Tuan Hsing-chien (段行建) told investors yesterday.
Last quarter’s weakness is expected to extend into this quarter because of an inventory buildup both at Innolux and its clients, as well as a seasonal slowdown.
Shipments of PC and TV panels would drop by a high-single digit percentage point this quarter from last quarter’s 34.3 million units primarily due to sagging demand for PCs, company president Wang Jyh-chau (王志超) said.
“We will focus on reducing our stockpile from last quarter. We have overestimated market demand during the Chinese shopping season in October,” Wang said.
Inventory days spiked to 50 days last quarter, from 42 days in the previous quarter, the financial statement showed. That was the highest level in at least two years.
“Innolux would also adjust its equipment loading rate in accordance with market demand,” Wang said, adding that the company plans to shut down certain production lines for annual maintenance this quarter.
To better utilize its equipment, Innolux plans to manufacture more ultra-high-definition, or 4K2K, TV panels, including smaller sizes such as 40-inch models, and more cost-effective touchpanels for smartphones and tablets, he said.
Innolux expects 4K2K TV panels to account for more than 10 percent of its total TV panel shipments this quarter, up from 5 to 10 percent last quarter, Wang said.
In the first nine months of the year, Innolux shipped 1 million 4K2K TV panels, he said.
Due to weak demand, average selling prices for PC and TV panels would shrink by a mid-single-digit percentage point this quarter from last quarter after a 1.73 percent decline to US$511 per square meter last quarter, from US$520 in the second quarter, Wang said.
Shipments for small and medium-sized panels are expected to fall by mid-single-digit percentage point from 99.5 million units last quarter, and prices would decline by low-teens percentage point sequentially, he said.
The company said it still aimed to remain profitable this quarter and expected the average selling prices to rise by between 3 percent and 5 percent per square meter this quarter sequentially driven by higher-margin products.
Separately, Innolux yesterday said it was in talks with banks to restructure its NT$45 billion in bank loans and expected to wrap up talks next quarter.
The firm said it has reduced its net debt-to-equity ratio to 87.6 percent last quarter from 93.7 percent in the second quarter and 134 percent a year ago.