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Mon, Nov 22, 2004 - Page 12 News List

Electronics firms in Singapore face earnings pressure


Singapore's electronics firms, major suppliers to the world's biggest tech giants and an intergral part of the city-state's economy, are likely to face earnings pressure from the slowdown in the global sector, analysts said.

Several of the city-state's top electronics makers are already feeling the pinch from weaker orders as their clients seek to clear an inventory backlog in the run-up to the important Christmas holiday season, they said.

The government has also recently cut its 2005 growth forecasts from between 8 percent to 9percent to 8 percent and 8.5 percent, citing weaker growth in the global electronics sector as one of the reasons.

"Basically it's an inventory correction by various high-tech companies as a result of slower demand in the markets," said Erly Witoyo, a Singapore-based credit analyst with Standard & Poor's ratings agency.

"It will have an impact on cash flow in the next few quarters."

Venture Corp has already become one of the big-name casualties, with net profit in the three months to September slumping 26.9 percent to S$48.1 million (US$429.33 million) from a year ago.

The company is Singapore's largest electronics contract maker and its clients include Hewlett-Packard, for which it makes computer printers.

Chartered Semiconductor Manufacturing Ltd fared better with net profits reaching US$16.23 million in the September quarter, reversing nearly US$76 million in losses a year ago and exceeding analysts' earnings forecasts of between US$5.5 million and US$13.5 million.

But the company, one of the world's three largest contract chip makers, warned the slowdown was likely to push the company into the red in the December quarter with losses of between US$44 million and US$54 million.

"As we go into the fourth quarter, we are seeing significant change in the outlook from our customers," Chartered chief financial officer George Thomas said last month when the company announced its September report card.

"The market weakness that we started seeing since the second half of June has deepened as customers in the supply chain reassessed their inventory positions and slower orders due to the softening in their end markets.

"As a result of this, and consistent with the business outlook of five of our larger customers, Chartered's outlook for the fourth quarter 2004 is now considerably weaker than the projections we had earlier in the year."

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