Lite-On Technology Corp (光寶科技) yesterday said its board had approved maintaining the company’s high dividend amid concerns about US-China trade tensions.
The company is proposing distributing a cash dividend of NT$2.92 per common share, a payout ratio of up to 85 percent.
Lite-On shares yesterday rose 1.72 percent in Taipei trading, with the payout translating to a 6.3 percent yield based on the NT$47.2 closing price, with the company saying that its free cash flow stood at NT$33.2 billion (US$1.08 billion) at the end of last year.
While lingering trade tensions would likely lead to a quarter-on-quarter sales decline this quarter, the company expects to post “significant” sales gains at the end of this month, Lite-On chief executive Warren Chen (陳廣中) told an earnings conference in Taipei.
In the final quarter of last year, net income fell 4 percent quarter-on-quarter, but rose 10 percent year-on-year to NT$25.21 billion, while revenue dipped 5 percent quarter-on-quarter to NT$50.5 billion, 7 percent lower that the previous year.
Earnings per share were NT$1.08.
During the period, ongoing trade tensions led to imports and consumption falling in China, leading to fewer orders from the company’s Chinese customers, Chen said.
Consumer electronics and home appliances suffered the greatest impact, while softer demand for gaming console power supply units and optical drives had resulted in a less than optimal product mix, Chen added.
However, Lite-On does not have much exposure to the slump in global smartphone sales, he said.
Gross margin in the fourth quarter also fell to 13.4 percent from 15.8 percent the previous quarter, Chen said, attributing the decline to a high comparision base set during the third quarter of last year, while a fall in price of memory chips did not help the company’s average selling price.
While a renegotiation with customers during the height of the US-China trade dispute between July and September had led to higher profitability, price erosion had returned to depress earnings in the fourth quarter, Chen said, adding that the automotive lighting business is facing stiff competition from its Chinese rivals.
Lite-On has plans in place for for production diversification like many of its peers, but the pace would remain slow as the trade talks unfold, he said.
Passive component prices have begun normalizing from scarcity-induced price increases over the past year, but higher inventory levels to fill rush orders ahead of the Lunar New Year holiday would likely add to costs this quarter, he added.
“We have to be ready to fill orders as market conditions rebound,” Chen said.
The company’s net income surged 203 percent year-on-year to NT$7.96 billion last year, with revenue dipping 3.47 percent year-on-year to NT$207.11 billion.
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