AU Optronics net profit drops more than estimated

By Chinmei Sung, Bloomberg

AU Optronics Corp., the world’s third-largest maker of liquid-crystal displays, posted a bigger decline in profit than analysts estimated as slowing demand for computers and flat-screen televisions drove down prices.

Third-quarter net income plunged to NT$860 million, or NT$0.09 a share, from NT$22.57 billion, or a revised NT$2.57, a year earlier, the Hsinchu, Taiwan-based company said in a statement yesterday. AU Optronics was expected to report profit of NT$4.6 billion, according to the median of 11 analysts’ estimates compiled by Bloomberg.

AU Optronics joins larger rival LG Display Co. in reporting a profit decline as overproduction, spurred by record earnings last year, forced LCD makers to scale back expansion plans amid a worsening credit crisis. CLSA Ltd. and JPMorgan Chase & Co. estimate the glut of panels will persist until the end of 2009.

“We caution that the worst is not over,” Jeff Pu, an analyst at Yuanta Securities Co., wrote in a report yesterday. “We see further downside risks due to tepid monitor demand, muted TV price elasticity.” Pu, who has a “hold” rating on AU Optronics, cut his estimate for the company’s 2008 earnings per share by 22 percent to NT$4.90. Third-quarter revenue fell to NT$104.1 billion from NT$138 billion, the company said.

LG Display, the world’s second largest LCD maker, last week reported third-quarter profit fell 44 percent after prices of computer and TV screens declined.

The Seoul-based company, AU Optronics, and smaller rival Chi Mei Optoelectronics Corp. trimmed production in the third quarter to ease industry oversupply. AU lost 3.4 percent to close at NT$25.65 before earnings were reported, while the benchmark TAIEX index fell 2.7 percent. The stock has declined 58 percent this year after advancing 43 percent in 2007.

Prices of 17-inch monitor panels dropped 35 percent in the third quarter from the end of June, according to researcher WitsView Technology Corp. Prices of 42-inch TV displays slipped 2 percent in the first half of this month, after falling 6 percent in September and 5 percent in August, the Taipei-based research company said.