Power electronics and energy management supplier Delta Electronics Inc (台達電) yesterday said it is to invest US$100 million expanding the capacity of its passive components subsidiary in the hope of meeting rising demand for power chokes used in automotive electronics and handheld devices.
It is the company’s largest investment to expand subsidiary Cyntec Co’s (乾坤科技) capacity in four years after an investment of about US$100 million in 2013, Delta said.
“We foresee a massive demand for chokes... Delta has to prepare before it comes,” company chairman Yancey Hai (海英俊) told reporters after the company’s quarterly investors’ conference in Taipei.
The expansion plan is likely to be completed in the third quarter and double production capacity for chokes, Hai said.
Cyntec is the world’s largest choke supplier by capacity, he said, without disclosing the size, adding that it contributed nearly 10 percent, or US$700 million, to Delta’s revenue last year.
The power management segment, which includes industrial and building automation and data centers, would also be a major growth driver, while the company has extended the reach of its industrial automation business from China to the US, Europe, the Middle East and India, Hai said.
“We used to focus on China, but we cannot rely on one market. We need to expand our scope to sustain industrial automation growth,” he said.
The firm reported NT$214.35 billion (US$6.9 billion) in revenue last year, a figure Hai said would increase this year.
The company posted a net income of NT$18.79 billion for last year, up by 0.08 percent from NT$18.71 billion a year ago, but earnings per share fell to NT$7.24 from NT$7.67.
While higher revenue lifted its gross margin by 0.54 percentage points to a historic high of 27.75 percent last year, its operating margin shrunk by 0.36 percentage points to 9.72 percent because of higher expenses, Delta said.
The company’s board has agreed to distribute a cash dividend of NT$5 per share, which translates into a payout ratio of 69.06 percent, higher than the previous year’s 65.2 percent.
The dividend yield was 3.09 percent based on Delta shares’ closing price of NT$161.5 in Taipei trading yesterday.
Meanwhile, Hai said Delta is seeking a bigger merge and acquisition (M&A) target in the field of industrial automation this year or next year, as part of the company’s long-term development strategy.
Hai said Delta is capable of making big investments, as the company had cash and cash equivalents of NT$55.57 billion as of the end of last year.
Delta in 2014 spent 3.9 billion Norwegian kroner (US$454 million) to acquire the power system provider, making it the firm’s first M&A in more than 10 years.
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