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Monday, September 02, 2002
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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