BenQ has first profit in seven quarters on share selloff (Taiwan)
BenQ Corp., the Taiwanese electronics maker whose chairman stands trial on insider-trading charges, posted its first profit in seven quarters on gains from selling shares in flat-screen affiliate AU Optronics Corp.
Net income was NT$570 million, Taoyuan, Taiwan-based BenQ said in a statement yesterday. It didn’t release year-earlier numbers. BenQ was expected to report a net loss of NT$424 million, according to the median estimate of four analysts Bloomberg News surveyed by telephone and e-mail.
BenQ sold a stake in LCD maker AU Optronics in the quarter to raise cash after Chairman K.Y. Lee’s 2005 acquisition of Siemens AG’s mobile-phone unit failed to bolster profit. The company’s efforts have been overshadowed by the court case involving Lee and other senior executives. Lee, who has denied the charges, is chairman at BenQ and AU Optronics.
“As they get back to manufacturing, then profit might improve,” said Michael On, who doesn’t count BenQ among US$100 million in his portfolio as managing director of Beyond Asset Management Co. in Taipei. “I would recommend a buy on this stock only because it couldn’t get any worse.”
Third-quarter sales will climb from the previous period because of “high season,” BenQ said in the statement, without elaborating. The company reported second quarter sales of NT$32.4 billion.
Shares of BenQ rose 3.6 percent to NT$15.90 yesterday before earnings were announced, while the benchmark TAIEX index rose 2.8 percent.
The company, whose products include mobile phones, personal computers and liquid-crystal display monitors, will change its name to Qisda Corp. as of Sept. 1.
BenQ posted a second-quarter operating loss, which measures sales minus operating expenses, of NT$1.91 billion after “cleaning” mobile-phone inventory, according to the statement.
Non-operating items added NT$2.52 billion to earnings, mainly as a result of the gain from selling AU Optronics shares. The company doesn’t break down non-operating income.
AU Optronics, in which BenQ owns a 8.42 percent stake, is the world’s third biggest maker of LCDs. BenQ booked a profit of about NT$1.5 billion from selling 100 million shares of AU Optronics in April.
BenQ will benefit from getting LCDs from AU Optronics as the two companies work to “strengthen business ties,” said Hsiung Hui, an AU executive vice president, at the meeting. Hsiung will become BenQ president as of next month, replacing Sheaffer Lee.
The global LCD panel market is expected to “face a shortage in the next two years” as screen producers are slow in expanding factories, Chairman Lee said at the meeting.
BenQ cut funding to BenQ Mobile GmbH & Co. in September of last year, forcing the unit into bankruptcy. To boost earnings, BenQ plans to spin off the business that makes branded electronics to focus on providing manufacturing services for other companies.
“The company’s profitability should improve sequentially in the second half as it separates the unprofitable branded handset business,” Robyn Hsu, who doesn’t own BenQ shares among the US$426 million funds he helps manage at Truswell Securities Investment Trust Co. in Taipei, said before the earnings announcement.
Lee, 54, will step down as chief executive officer of AU Optronics on Sept. 1 after he was charged with insider trading as well as money laundering, stock manipulation and falsifying public documents.
The executive has undergone two preliminary court proceedings to defend himself since July. The court didn’t set a date for when the case will continue when it convened earlier this week.
Indictments against Lee came after a two-month probe by Taiwan prosecutors into share sales by BenQ executives between January and March 2006 before the company announced its first- ever quarterly loss, prosecutors said in May.
BenQ President Sheaffer Lee and Chief Financial Officer Eric Yu were also charged with insider trading, money laundering, stock manipulation and falsifying public documents. The two executives have denied any wrongdoing.
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