Hynix's results for third quarter top expectations

Hynix Semiconductor Inc, the world's second-largest maker of memory chips, reported a third-quarter profit that beat analyst estimates after semiconductor sales fell less than expected. The company's stock rose.

Net income declined 3.5 percent to 511.5 billion won (US$489 million), compared with 530 billion won a year earlier, the Ichon, South Korea-based company said yesterday in a statement. The result topped the highest estimate of seven analysts surveyed by Bloomberg and the median of 330 billion won. Sales fell 3.3 percent, even as average product prices slid 37 percent.

The report may spur demand for a planned share sale valued at 2.4 trillion won by creditors in the company, which was bailed out in 2002. Hynix shares are the best performer this year among the world's top 20 semiconductor makers as investors bet it can cut manufacturing costs to sustain earnings as chip prices decline.

Changes bear fruit

"The earnings were a surprise and it looks like Hynix's business is structurally changing to generate steady profit," said Chung Doo-sun, who manages the equivalent of US$295 million at Wise Asset Management Co in Seoul. "The results offset concerns that earnings at technology companies may not recover as strongly as expected."

Hynix is reporting earnings a day before larger rival Samsung Electronics Co. The last time it disclosed earnings before Samsung was April 2002, when Hynix reported its first profit in six quarters. In the past five years, the earliest date Hynix reported third-quarter results was Oct. 19.

Operating profit, excluding overseas affiliates, fell 23 percent to 378 billion won and sales declined 3.3 percent to 1.5 trillion won, the company said. Hynix was projected to report operating profit of 341 billion won and sales of 1.4 trillion won, according to the analyst survey.

Shares of Hynix gained as much as 3.9 percent after the announcement. The stock was up 2.6 percent at 23,800 won as of 3:33pm on the Korea stock exchange.

Average third-quarter prices of dynamic random access memory (DRAM) chips used in computers fell 37 percent from a year earlier and rose 8 percent from the second quarter, spokeswoman Kim Ah-young said. The price drop matched estimates from JPMorgan Chase & Co analyst J.J. Park.

Nand shipments up

Prices of Nand flash memory chips, used in consumer electronics such as MP3 music players and digital cameras, fell 18 percent from the second quarter, Hynix said in a statement.

Nand shipments rose 80 percent from the second quarter, more than the 45 percent growth the company had earlier indicated, said Lee Seung-woo, an analyst at Meritz Securities Co who has a "buy" rating on the stock. DRAM prices also rose more than expected, he said.

Korea Development Bank, a state-controlled lender, yesterday said it won't participate in the planned sale of Hynix shares with other creditors. Korea Exchange Bank spokeswoman Lee Nahm-yon said the total size of the sale won't be changed after the lender pulled out of the offering.

Contributions from overseas affiliates and gains from the sale of Hyundai Autonet Co helped net income more than double from the second quarter, Hynix's said.