While it has not announced official results, Ritek said its third-quarter performance was not strong and gross profit margins may stand in the single digits, the company’s CEO said. The comments by Gordon Yeh, Ritek’s CEO, may refresh concerns about the leading CD-R disc maker, which has seen its shares badly damaged after a recent financial revision. In late August, it said it reversed its forecast for a net profit of NT$2.08 billion to a net loss of NT$3.25 billion this year, while cutting its revenue target 23% to NT$20.3 billion.
However, business should continue to improve in the coming months. The company’s realigned CD-R production portfolio focusing on high-speed discs, stronger demand for its recordable DVD products and a general rise in disc prices are among the factors attributing to the upturn.
Effects from a CD-R price hike this month will start reflecting on revenues in the last two months of the year, Yeh said, but will not be fully felt until the first quarter of next year. The executive declined to comment on whether Ritek would return to profitability in 2003.
There have been hopes that the price increase will help revert Ritek’s deteriorating profit levels. Its gross margins fell to 6.6% in the second quarter from 19.5% in the prior quarter, resulting in the first-half average of 12.2%. That is well below main competitors CMC Magnetics’s 20.5% and Prodisc Technology’s 31.8%.
To combat a maturing market for CD-R discs, Ritek will gear up its DVD-RW, DVD+R and DVD-RAM disc production in the future, anticipating rising demand for those formats, Yeh said.
Citing data from market research reports, Yeh noted the recordable DVD disc market will expand by four-fold next year to 400 million units before reaching 900 million in 2004.
Ritek is currently shipping 4x DVD+R discs and expects to introduce 8x and 12x discs next year.