Sat, Mar 11, 2023 page12
Asustek slips into red on weak demand
RECOVERY AHEAD: Inventory levels surged on sluggish consumer and corporate PC demand last quarter, but should return to healthy levels next quarter, Asustek said
By Lisa Wang / Staff reporter
Asustek Computer Inc (華碩電腦) last quarter slid into the red for the first time in four years, posting losses of NT$3.82 billion (US$123.83 million) as surging inflation and a slackening world economy depressed PC demand.
That compares with a net profit of NT$6.19 billion in the third quarter and NT$12.06 billion in the fourth quarter of 2021.
For the whole of last year, Asustek’s net profit plummeted about 67 percent to NT$14.69 billion from NT$44.55 billion in 2021.
The logo of Asustek Computer Inc is pictured in an undated photograph at the company’s headquarters in Taipei’s Beitou District.
Photo: Fang Wei-chieh, Taipei Times
The company, headquartered in Taipei’s Beitou District (北投), said PC market demand would remain extremely weak in the first half of this year, and it expects its operating margin to remain in negative territory in the first two quarters.
Sluggish consumer and corporate PC demand drove up its obsolete inventory and ineffective sales allowances, putting a squeeze on profit margins.
The company’s operating margin fell to minus-4.2 percent during the final quarter of last year, from 2.3 percent in the third quarter and 8.7 percent in the same period of 2021.
Gross margin dropped to 8.2 percent last quarter from 11.2 percent in the previous quarter and 19.6 percent in the fourth quarter of 2021.
After reducing its obsolete inventory allowance by 24 percent sequentially to NT$132.77 billion last quarter, the company expects its inventory to return to healthy levels next quarter.
The rise in inventory allowance was a major drag on the company’s financial performance last quarter, in addition to disappointing PC sales, Asustek co-CEO S.Y. Hsu (許先越) told investors at a virtual conference yesterday.
Inventory rose as the company aggressively stocked up on PC components to match its overly optimistic forecast of PC market demand, he said.
A severe component supply constraint at the time was also a factor, he added.
“End consumer demand and demand from channel distributors are still very pessimistic,” Hsu said. “However, we expect market sentiment to return to normal in the second half of this year.”
PC sales in China would serve as a key indicator, as consumers are expected to be more willing to spend after the nation’s reopening and economic stimulus measures are implemented, Hsu said.
High inflation in the US and Europe would continue to hamper spending, he added.
Asian markets made up about 47 percent of the company’s total sales last year.
Asustek expects its PC shipments to contract between 15 and 20 percent sequentially this quarter.
Shipments of motherboards and graphics cards are forecast to drop by 5 to 10 percent during the same period.
Revenue would continue to slide this quarter, before rebounding by 10 percent next quarter, the company said.
PCs contributed 64 percent to the company’s overall revenue last quarter.
“The first quarter should be the trough for the PC industry and for Asustek as well,” Asustek chief financial officer Nick Wu (吳長榮) told investors.
The company expects its operations to return to “normal” in the second half, after emerging from a “short-term abnormal period,” with gross margins bouncing back to about 15 percent based on the company’s historical trends, Wu said.
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