Thu, Mar 12, 2009 page11

• Fitch downgrades ratings for AUO, Acer on doubts

  DEMAND CONTRACTION The rating agency said that the steep depreciation of the South Korean won would put AUO in an unfavorable position vis-a-vis its rivals

  • By Jerry Lin / STAFF REPORTER
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  Fitch Ratings yesterday downgraded to “negative” its outlook for AU Optronics Corp (AUO, 友達光電), the nation’s top flat-panel maker, and three other local computer makers including the world’s No. 3 PC maker, Acer Inc (宏碁), as global economic woes started taking a toll on their operations since the second half of last year.

  AUO, the world’s third-largest supplier of liquid-crystal-display (LCD) panels, saw its long-term foreign and local currency Issuer Default Ratings (IDR) downgraded to “BB minus” from “BB plus” by Fitch Ratings, which also cut AUO’s national long-term rating to “BBB” from “A minus.”

  “The rating actions on AUO reflect its significantly weakened operational performance in the second half of last year and Fitch’s view that the economic turmoil will be protracted until at least midway through 2010,” the international ratings agency said in a statement yesterday.

  Fitch said that it expected the Hsinchu-based AUO to face continuous challenges in the next several quarters as a result of pricing pressures from downstream vendors and weakened demand for electronic products such as TVs, PCs and handsets.

  The steep depreciation of the South Korean won was also placing AUO in an unfavorable position in competition with its major South Korean rivals, Fitch said in the statement.

  AUO’s profitability and financial leverage are likely to weaken this year, and a small recovery in shipment and pricing levels last month is unlikely to turn the display industry around, it said.

  In a separate statement yesterday, Fitch said it had taken negative rating action on three Taiwanese computer companies — Acer, Asustek Computer Inc (華碩電腦) and Quanta Computer Inc (廣達電腦).

  The agency said it had revised its outlook on Acer and Quanta to “negative” from “stable,” while also downgrading Asustek’s long-term foreign and local currency Issuer Default Ratings and national long-term rating by one notch, and placed these ratings on Rating Watch Negative.

  Fitch said the rating action on the Taiwanese PC companies was based on its view that deterioration in operating performance was inevitable this year because of the global economic downturn.

  “The PC companies are likely to face significant demand contraction as corporations and customers’ abilities to buy or upgrade their computers has diminished, particularly in recession-plagued developed countries,” Kevin Chang (張崇人), director of Fitch Ratings’ Asia-Pacific Telecommunications, Media and Technology team, was quoted as saying in the statement.

  In Fitch’s view, Acer’s revenue and margins were likely to decline this year, the statement said, adding that Fitch’s GDP contraction forecasts for Acer’s major markets — Europe and the US — suggested that the world’s third-largest PC vendor was unlikely to be exempt from the effects of the global downturn, despite the company’s report of a 10.7 percent year-on-year sales increase in the fourth quarter of last year.

  The agency also said it believed that Quanta, the world’s largest laptop computer maker on contract basis, was likely to face challenges in maintaining its profit margin this year given the high level of competition in the contract manufacturing service business.

  Asustek, maker of the popular Eee PC netbooks, is expected to remain strong in product design, but is losing its first-mover advantage on netbooks, or low-cost mini-notebook PCs, as competitors are catching up in this segment, the statement said.
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