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AU Optronics Profit Beats Estimates on TV Demand, Flat-Panel Price Rise
AU Optronics Corp., Taiwan’s second- largest maker of liquid-crystal displays, posted second-quarter profit that beat analyst estimates after demand for more expensive televisions pushed shipments and prices higher.
Net income was NT$11.2 billion ($350 million), compared with a loss of NT$6.6 billion a year earlier, the Hsinchu, Taiwan-based company said in a statement today. The average of 16 analyst estimates compiled by Bloomberg was for profit of NT$8 billion.
AUO, which was overtaken by Chimei Innolux Corp. as Taiwan’s biggest LCD maker in March, posted sales that beat analyst estimates due to rising orders from television and computer makers who are stocking up in anticipation of strong demand in the second half of the year. An oversupply of panels will slow price growth while AUO will cut factory usage as demand cools and it adds more capacity, the company said.
“We attribute the revenue surprise to better-than-expected shipments in the second quarter as downstream makers and brands restocked inventory for the traditional hot season,” Calvin Shao, who rates the stock “hold” at SinoPac Financial Holdings Co. in Taipei, wrote in a July 26 report. “We think it’s inevitable that panel makers’ profitability would suffer in the second half.”
AUO posted a 56 percent increase in second-quarter revenue to NT$128.6 billion. The average of 17 analyst estimates compiled by Bloomberg was NT$123 billion.
The company’s shares added 0.7 percent to close at NT$30.80 in Taipei before the announcement. The stock has lost 21 percent this year, compared with a 4.9 percent drop in the benchmark Taiex index.
Production Cut
Stronger sales of more expensive televisions using light- emitting diodes and “nearly full” capacity utilization helped spur profit during the quarter, Chief Financial Officer Andy Yang said at an investors’ conference today in Taipei. AUO’s factory usage will fall to the “low-nineties” percent this quarter, he said.
AUO’s acquisition of a Singapore factory from Toshiba Mobile Display Co. will boost its capacity to make panels for notebook computers this quarter while it also plans to strengthen alliances with other customers, it said in a statement today.
“China inventory is admittedly higher than before, but we believe that the October holiday will provide demand momentum,” Yang said.
New Plants
The company also plans to spend NT$400 billion over 12 years to build two new LCD plants and two solar power factories in Central Taiwan beginning next year, President and Chief Executive Officer Chen Lai-juh said today. The LCD factories will use so-called 11th-generation technology, he said.
Gross margin, a key guide of profitability that measures the percentage of sales less the cost of goods sold, climbed to 15.8 percent during the period, from 12.8 percent in the prior quarter, according to the statement.
LEDs, a power-saving light source used to illuminate displays, accounted for 15 percent of television backlights in the second quarter and will rise to 40 percent by the end of the year, Executive Vice President of Global Business Paul Peng said at the investors’ conference today.
Average prices of panels for televisions climbed 2.1 percent to $247 during the quarter, from $242 three months earlier, while those for computer and notebook monitors were unchanged at $68, AUO said in the statement today.
Prices of TV panels will climb “slightly” this quarter while those for computer monitors will register a small decline, AUO said today. Shipments of TV panels will rise about 10 percent this quarter from the prior quarter and monitor panels will be flat, it said today.
“The end market looks good but there’s some inventory in the pipeline that needs to be absorbed,” Peng said.
AUO today reiterated its plan to spend NT$100 billion this year.
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.
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