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Wed, Jul 07, 2010 - Page 10 News List

Elpida to cut debt and buy assets amid record profits

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Elpida Memory Inc, the world’s third-biggest maker of computer-memory chips, plans to cut debt and buy assets as a recovery in computer sales helps it post record profits a year after receiving a government bailout.

“We’ll seek opportunities including acquisitions and partnerships,” executive officer Takehiro Fukuda, who oversees finance and accounting at Tokyo-based Elpida, said in an interview at his office.

“We need to further expand the range of our business” in areas such as mobile phone and television chips, and plan to cut our debt-to-equity ratio to one from 1.3 by yearend and eventually to 0.3, Fukuda said.

The manufacturer received a ¥30 billion (US$341 million) capital injection from state-run Development Bank of Japan last year after slumping semiconductor prices led to a record loss in fiscal 2008. Elpida expects record profits this financial year on increased sales as new mobile devices require more memory to process programs, company president Yukio Sakamoto said last month.

Elpida said a year ago it would expand partnerships with Taiwanese makers of dynamic random access memory chips and improve its financial position under a Japanese government-backed revival plan that runs until March 31, 2012. Bond prices reflect market confidence in the strategy, Fukuda said.

Elpida has ¥30 billion in securities maturing in December and is considering options including selling convertible bonds and dollar notes, Fukuda said. It registered to sell as much as ¥100 billion in bonds, according to a filing with the Japanese Ministry of Finance on Dec. 14.

The company posted net income of ¥3.09 billion in the 12 months ended March 31 compared with a ¥178.9 billion loss a year earlier, the company said on May 12.

“Their restructuring is welcome,” said Yuichi Ishida, an analyst at Mizuho Investors Securities Co in Tokyo. “Elpida has to improve a weak balance sheet. They also need to improve cost competitiveness.”

The Japan Credit Rating Agency revised Elpida’s outlook to stable from negative on June 22, saying its financial structure will “significantly” improve on demand for DRAM — chips that serve as short-term memory inside computers.

“We shouldn’t rely on state support, but we have to compete with rivals in [South] Korea or Taiwan where government support is expected,” Fukuda said.

Even after March 2012 “we expect implied support from our government,” he said.

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