Compal shares take a hit after production line fire

Compal Electronics Inc (仁寶電子) shares fell as much as the 7 percent daily limit after a fire at a subsidiary destroyed a production line, cutting June sales.

The fire, which broke out at 6:30am and was put out within an hour, destroyed one of eight production lines at Compal Communication Inc, which makes cellular telephones for Motorola Inc.

The disruption will cut sales at the unit by as much as NT$10 million (US$289,943) in June, Compal said in a statement. The fire didn't damage computer production at Compal, one of Taiwan's biggest notebook computer makers.

"The fire won't affect orders from our customers," said Compal Vice President Eric Lin. Insurance will cover the cost of the damage, Lin said.

The company's customers also include Dell Computer Corp, Hewlett-Packard Co and NEC Corp. Compal shares fell as low as NT$34.70 at the start of trading. They closed down NT$0.80, or 2.1 percent, at NT$36.50, Compal has started to make personal digital assistants and mobile phones as profit margins for notebook computers fall. The company's first-quarter net income was NT$868 million, a quarter less the same period last year.

Just last month Compal made headlines after it sold US$145 million of stock after a two-month delay, at a discounted sale price and forecast of stronger sales attracted investors.

Compal sold 120 million shares at NT$40 (US$1.2) each in the form of global depositary receipts, said spokeswoman Dorothy Lee at Goldman Sachs Group Inc, which arranged the sale. That's one-fifth less than the price announced in December.

Compal put off a share sale in March following a 9 percent slide in Taiwan's computer-oriented leading stock index during the last two weeks of February. Since then, the company said it expects to sell 100 times more parts to a unit of NEC Corp in the next five years, helping it ride out the slump in global demand for computers.