Chimei Innolux shares fall after failure to select board of directors chairman


CNA

TAIPEI — Shares of Chimei Innolux Corp. came under pressure yesterday after the company said it remained to be seen whether its board of directors will select a chairman by the end of December to replace Frank Liao, who resigned earlier this month, dealers said.

The uncertainty over the company’s leadership led investors to doubt whether Hon Hai Precision Industry Co., one of Chimei Innolux’s shareholders, will send a representative to lead the company’s management, a move that creditor banks and investors have hoped for.

Liao was a board representative of Chi Mei Corp., another of Chimei Innolux’s shareholders.

At the end of trade, Chimei Innolux shares fell 3.49 percent to NT$12.45. H.C. Tuan, Chimei Innolux’s chief executive officer, said Tuesday he was not sure whether a new chairman would be named by the end of the year after Liao’s departure, and he did not directly answer a question on whether he would succeed Liao as the market widely expects.

“Tuan comes from the Hon Hai camp. If he assumes the position now, investors will feel relieved as Hon Hai will lead management in helping the company take on its current financial difficulties,” Grand Cathay Securities analyst Jeff Chang said.

“But Tuan’s latest comments on the management reshuffle have stirred up fears that without Hon Hai’s support, it will be hard for the company to reach an agreement with bank creditors to roll over the company’s loans,” Chang said.

According to Chang, Chimei Innolux is faced with NT$67.5 billion in loans that have to be repaid in the next year while having only NT$30 billion in cash at the end of the third quarter of this year.

Chimei Innolux creditor banks have repeatedly said they want to get a guarantee from Hon Hai before extending new loans to the company.

“The company is likely to incur more losses in the upcoming few quarters,” Chang said. “If it cannot get a nod from the banks to roll over its massive loans or get a new syndicated loan, the financial difficulties Chimei Innolux encounters will become tremendously pressing.”

Chang said concerns over the global flat panel market outlook was still affecting investors’ sentiment toward Chimei Innolux.

“I expect Chimei Innolux will continue to post losses in the fourth quarter of this year and in the first half of next year due to weak global demand,” he said.

In the first nine months of this year, Chimei Innolux had a net loss of NT$44.45 billion, or NT$6.08 per share, compared with a net profit of NT$9.88 billion, or NT$1.59 a share, recorded a year earlier.

Chang said Chimei Innolux is expected to post a net loss per share of NT$8-NT$9 for all of 2011 and of NT$4-NT$5 in 2012.