Largan Precision Co (大立光), the world’s leading smartphone camera lens supplier, yesterday unexpectedly reported a quarterly drop in net income and gross margin for the April-to-June quarter, dragged down by lower production yields for new products and currency losses.
Largan’s net income was NT$4.71 billion (US$155 million) last quarter, 3.48 percent lower than NT$4.88 billion in the previous three months.
Earnings per share were NT$35.14, compared with NT$36.42 in the preceding period.
The company’s gross margin dropped below 70 percent, contracting by 4.45 percentage points quarter-on-quarter to 66.49 percent and the operating margin also dipped 3.84 percentage points to 58.03 percent from the previous quarter, company data showed.
“The quarterly contraction in gross margin last quarter was mainly due to unsatisfying yield for new products. The strong New Taiwan dollar also weighed on the margin performance,” Largan special assistant to the chief executive officer Josephine Huang (黃印嘉) told a teleconference.
It is usually challenging to raise yield at the beginning of mass production for new products, Largan chief executive officer Adam Lin (林恩平) said, adding that changes of shipments orders by “some” clients also pressured the production yield last quarter.
“Some clients decided at the last minute not to ship products and then later changed their minds asking us to ship immediately,” which added difficulty in controlling yield performance, Lin said.
On an annual basis, net income last quarter grew 27.64 percent compared to the same period last year, when it stood at NT$3.69 billion, supported by better demand this year.
In the first six months of this year, Largan’s combined net profit reached NT$9.59 billion — a 31 percent surge from NT$7.31 billion made over the same period a year ago. That translates into earnings per share of NT$71.56 in the first half, compared with NT$54.52 per share the same time last year.
Looking ahead, Lin said the this month’s performance would beat last month’s NT$3.85 billion in revenue.
“This month will be better than last month. The next month will be better than this month,” Lin said, citing order forecasts provided by clients.
However, Lin said it is hard to forecast Largan’s yield improvement this quarter, as some other clients are scheduled to ship new products during the period.
Largan is to start installing equipment at its new plant at the end of this quarter and begin mass production next quarter, Huang said, adding that the company will start to book depreciation and amortization for the new plant next quarter.
Lin said he expected camera lenses with bigger apertures to become mainstream in smartphones in the near future.
Largan had sent customers samples of a camera lens made up of seven layers of plastics, which enable better control of light at a bigger aperture, compared with lenses made up of only six plastic layers, Lin said, adding that the new model would also support higher resolutions.
Largan shares fell 1.75 percent to close at NT$5,335 in Taipei trading yesterday, ahead of the company’s teleconference.
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