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AUO forecast to post loss per share of NT$1.28 in Q3

2012/09/22 20:36:51

Taipei, Sept. 22 (CNA) AU Optronics Corp., one of Taiwan's leading flat panel makers, is expected to incur NT$1.28 (US$0.04) in loss per share for the third quarter, as the company will have to make provisions to cover a financial penalty in a price-fixing case, according to Daiwa Securities.

In a research note, Daiwa Securities said Friday that the massive funds AUO will have to set aside will put the flat panel maker's net loss for the quarter at NT$11.3 billion, instead of of NT$4.62 billion as estimated earlier.

On Thursday, the U.S. District Court in San Francisco imposed a US$500 million (NT$14.75 billion) criminal fine on AUO for its role in a conspiracy to manipulate flat screen prices between 2001 and 2006. An AUO executive and a former executive were sentenced to three years each in prison.

Before the ruling, AUO had assigned US$277 million for price-fixing case. The company said it will set aside an additional US$223 million in third quarter, but it intends to appeal the court decision.

The US$500 million fine, however, is less than the US$1 billion U.S. prosecuting attorneys had recommended to the court.

Daiwa said that as AUO is likely to appeal the ruling, the company's litigation expenses will increase accordingly.

AUO’s bottom line is expected to improve at slower pace than that of its competitor Chimei Innolux Corp., Daiwa said.

For its part, Nomura Securities said AUO shares may start moving higher soon, as the litigation uncertainty has been removed since the court ruling.

The ruling is likely to have a limited impact on AUO’s cash flow because it has been allowed to pay the fine in phases over three years, the brokerage said.

However, Nomura retained its "neutral" recommendation on AUO shares, taking into account more inventory adjustments in the flat panel market and further losses likely in the company's solar energy operations.

Nomura also maintained its target price of NT$11.6 on the stock.

AUO shares closed up 5.05 percent at NT$11.45 Friday on the Taiwan Stock Exchange, with 146.36 million shares changing hands.

Meanwhile, Bank of America Merrill Lynch said it expects AUO will turn a profit by the end of the second quarter of next year, as the global flat screen sector has been showing signs of recovering in the second half of this year.

An improvement in AUO's product portfolio is expected to boost the company's profit margin, starting from the second half, the brokerage said.

It upgraded its recommendation on AUO shares from "underperform" to "buy," and raised its target price from NT$12.7 to NT$15.

(By Lo Hsiu-wen and Frances Huang)
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