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AU aims for H2 profit, LCD demand rises

Post Time:May 21,2009Classify:Company NewsView:252

Taiwan's AU Optronics Corp (2409.TW: Quote, Profile, Research, Stock Buzz) (AUO.N: Quote, Profile, Research, Stock Buzz), the world's No. 3 LCD maker, expects to return to profitability in the second half of 2009, boosted by improving demand for flat-screen TVs, especially from China.

Slack sales and lower prices pushed AU Optronics into the red in the past two quarters, but the company has recently benefited from a spate of orders from China, and a recovery in TV demand in North America.

In an interview with Reuters on Thursday, AU Executive Vice President Paul Peng said the company is experiencing a shortage of liquid crystal displays (LCDs) and this will push up panel prices further in the second half.

About one month ago, AU had forecast a rise in shipments and panel prices for the current quarter.

In reply to a question on when AU expected to turn profitable, Peng told the Reuters Global Technology Summit in Taiwan that the firm will be profitable in the second half, even though many analysts predict AU won't be profitable till next year.

"I've a feeling that the demand strength is stronger now," he said at the company's headquarters.

"TV (growth) is going up and China grows very fast," said Peng, who is in charge of AU's TV business. "Orders are not a problem but supply will be a concern."

In Taipei, AU shares closed up 0.3 percent on Thursday, in line with the main TAIEX's .TWII gain. So far this year, AU shares have risen 46 percent, also similar to the big board's rise.

"I still have to see if demand can pick up at a faster pace in the second half before I can believe AU can make money again," said Andrew Deng, assistant vice president at Taiwan International Securities.

CHINA BOOM

AU's Peng said panel shipments to its branded TV clients in China would hit 4 million units this year, up by as much as 4-fold from last year's level and higher than the 2- to 3-fold growth he estimated one month ago.

Beijing's massive stimulus package to boost its economy means AU and Chi Mei could reap bigger profits in China, home to some of the world's biggest TV makers, including TCL Multimedia (1070.HK: Quote, Profile, Research, Stock Buzz) and Skyworth Digital (0751.HK: Quote, Profile, Research, Stock Buzz).

Together, AU and Chi Mei (3009.TW: Quote, Profile, Research, Stock Buzz), the Taiwan's two biggest LCD makers, could hold a 50 percent share of China's LCD TV panel market this year, up from 34 percent last year and larger than LG Display's (034220.KS: Quote, Profile, Research, Stock Buzz) 14 percent and Samsung's (005930.KS: Quote, Profile, Research, Stock Buzz) 12 percent, according to research firm DisplaySearch.

AU has said it could be running at almost full capacity in the second quarter as it brings forward the start of operations at a new LCD plant ahead of schedule, to meet demand.

The island's top LCD maker raised its 2009 capital expenditure forecast by up to 20 percent in April.

Peng said there won't be any threat from a supply glut for now even though some industry analysts warned a nascent recovery could be shortlived if major LCD makers overestimate demand and race to increase production.

In a Monday report, UBS said it expects to an oversupply in panels that will cause prices to decline again in June.

UBS forecast AU would make a net loss of T$35.6 billion ($1.1 billion) in 2009 but would make a net profit of T$11.5 billion in 2010.

($1 = T$32.6)

Source: ReutersAuthor: shangyi

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