CD-R disc makers post declines in 1H earnings
Taiwan’s major CD-R disc makers all reported sharp
declines in first-half net profit from a year ago, hurt by
slumping disc prices. Meanwhile, the future direction of CD-R
prices remains unclear, as manufacturers take a wait-and-see
attitude before rivals make pricing moves.
Ritek, Lead Data and GigaStorage posted losses in the first
half due to narrowing margins and foreign-exchange losses,
despite up to 30% revenue growth year-on-year during that
period.
These companies have also revised their earnings guidance
for the full year, saying that they now expect a loss rather
than a profit due to significant margin pressure. On a pre-tax
basis, Ritek predicted a loss of NT$3.5 billion, Lead Data
NT$424 million and GigaStorage NT$495 million for 2002.
CMC Magnetics and Prodisc Technology have fared relatively
well, but both saw a severe downturn in earnings. CMC’s
first-half net profit slid 75% year-on-year while Prodisc’s
fell 55%. They didn’t give financial projections for
the year.
Ritek expects a sequential loss for the current quarter,
citing a market glut that leaves little room to raise prices
to improve margins. Per-unit contract prices for blank CD-R
discs have arrived at a low of US$0.14, nearing the NT$0.135
that it takes to make a disc and translating into a razor-thin
profit in disc manufacturing.
CMC and Prodisc, more optimistic in their business assessment,
said prices will stabilize around year-end after inventory
returns to healthier levels in the current quarter, which
would stimulate buying among distributors. They didn’t
comment on their future pricing plans.
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