Thursday, September 28

MPI faces challenging times on weak global demand


WEAKER DEMAND: MPI reported weaker results, with a possibility of a prolonged slow down in the sector.

KUCHING: Malaysian Pacific Industries Bhd (MPI) reported weaker results, posting a year-to-date loss of RM25.8 million as sales of most categories of products in the semiconductor industry shrunk except for tablets and smartphones.

OSK Research Sdn Bhd (OSK Research) affirmed that MPI reported sequentially weaker results as the second quarter of the financial year 2012 revenue fell to RM279.2 million on anaemic demand from upstream players amid an industry-wide general inventory correction as the semiconductor sector suffered a disruption in its supply chain.

The fixed costs remained high owing to under-utilisation of assets during the quarter, which led to negative operating margins that narrowed by 280 basis points (bps) quarter-on-quarter to negative 5.8 per cent, in turn dragging the group’s bottom-line to a loss of RM16.2 million.

The first quarter of calendar year 2012 was considered a seasonally weak period. Skyworks Solution Inc expected revenue to contract by nine per cent quarter-on-quarter to US$360 million as handset manufacturing activity tapered off after the holiday season.

Maxim Integrated Products anticipated revenue to weaken to US$555 million to US$585 million implying one per cent to six per cent quarter-on-quarter due to softer demand from the end markets especially computer notebooks and optical equipment used in communications infrastructure.

Linear Technology Corporation believed that it was at an inflection point and estimated revenue to go up by four per cent to eight per cent quarter-on-quarter.

OSK Research stated that the International Monetary Fund (IMF) cut its global growth forecast by 0.7 per cent and 0.6 per cent for financial year 2012 and 2013 respectively on fears that the European debt crisis might cause ripple effects globally.

There might be a possibility of a prolonged slowdown in the sector as consumers might be more cautious on spending.

The industry was still plagued by an oversupply of semiconductor equipment, with the book-to-bill ratio for worldwide semiconductor manufacturing equipment at 0.88 for the month of December.

The Semiconductor Industry Association added that the quarterly worldwide semiconductor sales contracted by 2.4 per cent quarter-on-quarter and 3.1 per cent year-on-year. The research firm pegged MPi’s fair value RM2 per share.