CPT still losing money, but LCD business swings to profits

Although Chunghwa Picture Tubes (CPT) continued reporting overall losses last quarter, the gross margins from its TFT LCD business turned positive, and its LCD business swung from pre-tax losses of NT$3.2 billion in the second quarter to NT$59 million in profits. A rebounding large-size panel ASP (average selling price), increased large-size panel shipments and lowered material costs, as well as a successful mix of products, contributed to helping the LCD segment swing to profits, according to company CFO James Wu.

The company’s TFT business had consolidated sales of NT$21.75 billion last quarter, up 27% from NT$17.15 billion in the second quarter while its gross margins improved from negative 8% to positive 8% and operating margins swung from negative 16% to positive 2%, the company said.

CPT’s large-size ASP rose from US$145 in the second quarter to US$157 last quarter. Also, the maker started to see more shipments of larger-size panels in September thanks to newly added capacity from its 4.5-generation (4.5G) and 6G TFT LCD plants, Wu said.

The company shipped 4.153 million large-size panels last quarter, up 14% sequentially, with the monitor segment accounting for 77% of the shipments, while notebook and TV panel contributed 18% and 5%, respectively. The company’s TV panel shipments reached 200,000 units last quarter, up 54% sequentially from 130,000 panels in the second quarter, the company said.

With its expanded capacity, material costs for CPT’s 15-inch monitor panels were lowered 7% last quarter, with costs for 17-inch monitor panels and 15.4-inch notebook panels falling 5% and 10%, respectively, Wu said. The company will further lower its material costs 3-5% this quarter, he added.

LD Chen, a vice president with CPT, indicated that CPT will ship 1.9 million notebook panels and 6.8 million monitor panels in the second half of this year, with the full-year TV panel shipments hitting one million units this year. In addition, CPT aims to ship 16-17 million large-size panels next year, up from 12 million this year, he added.

Brian Lee, assistant vice president of CPT’s sales and marketing division, noted that the company aims to slightly increase the production proportion of its 17-inch monitor panels to 74% of its overall monitor panel shipments and will start to produce 20.1-inch widescreen monitor panels at its 6G plant.

CPT will significantly increase shipments of 15.4-inch notebook panels and slightly increase shipments of 17-inch monitor panels at the expense of 15-inch panels.

For the small-to-medium-size segment, CPT said it will start mass producing handset panels this quarter. Its small-to-medium-size panel shipments will reach 2.5 million units this quarter, up from 900,000 last quarter, with 46% of the panels being for 2.5-inch and above handset panels, compared to last quarter, when 97% of the shipments were for 7- to 9-inch car-use and portable DVD player panels.

Currently, 70% of CPT’s 3G capacity is dedicated to small-to-medium-size panel production, but the percentage will be raised to 100% this quarter, the company said.

However, overall CPT suffered pre-tax losses NT$698 last quarter on consolidated sales of NT$27.50 billion. The company’s CRT operating margin deteriorated from positive 10% to negative 3%, racking up losses of NT$104 million last quarter. However, the business turned profitable this September and will keep being so this quarter, Wu said.

Its PDP segment reported pre-tax losses of NT$666 million last quarter, about the same level of losses reported in the second quarter. CPT recognized depreciation fees of NT$150 million per month last quarter on the business, but the amount is expected to fall to NT$20 million in 2006, Wu indicated.

Thanks to rising LCD shipments, expected stable panel prices and profitability from its CRT business, CPT expects its overall performance to continue improve this quarter. However, the company will significantly reduce its capital expenditure (capex) plans for next year to NT$26.1 billion, down from NT$61.6 billion this year.

Source: company, compiled by DigiTimes, November 2005.

Source: company, compiled by DigiTimes, November 2005.

Article translated by Carrie Yu and edited by Michael McManus