Airtac to see profit decline as trade war weighs sales

By Chen Cheng-hui  /  Staff reporter

Mon, Nov 19, 2018 - Page 15

Pneumatic components supplier Airtac International Group (亞德客) might see a double-digit percentage drop in annual profit this year, as the US-China trade war started to weigh on the firm’s sales in the third quarter, Jih Sun Securities Investment Consulting Co (日盛投顧) said on Wednesday last week.

Airtac posted consolidated revenue of NT$3.85 billion (US $124.6 million) for the third quarter, slipping 0.26 percent annually and 15.63 percent from the previous quarter.

The figure failed to meet market expectations.

“The company’s sales are expected to continue to slide in the fourth quarter of 2018 and in the first quarter of 2019, as its order visibility faces international political and economic headwinds, as well as potential disruptions from the Lunar New Year holiday” in February, Jih Sun analyst Wayne Chen (陳有裕) said in a research note.

“We project Airtac’s 2018 sales to climb 13.22 percent year-on-year to NT$15.53 billion, but net profit is forecast to decrease by 16.8 percent to NT$2.75 billion, with earnings per share [EPS] of NT$14.52,” Chen said.

Airtac is the second-largest pneumatic components supplier in China, with a market share of about 20 percent, trailing Japan’s SMC Corp, which has a market share of 34 percent.

The firm’s products include valves, filters, regulators and lubricators. The company, incorporated in the Cayman Islands, also develops new products such as electrical cylinders, linear guides, ball screws and switches.

“As Chinese demand for pneumatic components for automation equipment still accounts for 92 percent of its total revenue, Airtac will need to adopt a competitive pricing strategy to increase its market share in China and sustain its sales growth,” Chen said.

Considering the trade war — which will likely affect China’s pneumatic components market — the pricing competition from peers and rising operational costs in China, Airtac’s revenue next year is likely to grow 3.31 percent to NT$16.05 billion, while net profit is projected to increase 5.09 percent to NT$2.89 billion, with EPS of NT$15.26, he said.

Airtac last quarter posted net profit of NT$456.46 million, down 49.06 percent annually, with EPS of NT$2.41.

Gross margin fell 9 percentage points annually to 46.49 percent and operating margin dropped 16 percentage points to 24.29 percent, the company said earlier this month.

In the nine months to Sept. 30, net profit totaled NT$2.16 billion, down 13.9 percent annually, while EPS was NT$11.42, compared with NT$13.88 a year earlier, it added.