Everlight and Epistar Faces Tough Market Situations in 2Q15

Top Taiwanese LED manufacturers Everlight and Epistar revenues for second quarter of 2015 were impacted by trending low LED prices on the market, according to a China Times report.

Even though Epistar revenues made a turnaround in second quarter, the company still posted loss per share of NT $0.11. Although, competitor Everlight posted a slight profit, its net profits shrunk 45% during second quarter of 2015, and earnings per share was a mediocre NT $0.74.

The LED industry outlook is becoming increasingly tougher, and projected positive effects from the industry’s peak season in third quarter have not met expectations. TV backlight demands have gradually bounced back, but low prices continue to suspend over the LED lighting industry. Manufacturers reported weak financial performances in 2Q15, for instance Epistar reported its capacity utilization rates reached a mere 70% during second quarter.

Moreover, sliding blue LED chip Average Sales Price (ASP) caused gross margins to drop to a mere 9.24%, a decline of 12% compared to the same period in 2014. The company reported a loss of NT $320 million (US $10.11 million), but the losses was alleviated by the company’s Euro Convertible Bonds (ECB) performance during this period, which based on International Financial Reporting Standards (IFRS) posted a profit of NT $280 million. This drove down the company losses to NT $100 million in 2Q15.

As for the outlook for 3Q15, Epistar’s LED backlight demands rose incrementally, but the rebound has been slow with low visibility, said Epistar. However, orders in July was slightly better than June, and the same situation was observed in August. Revenues in third quarter are estimated to be about the same as during second quarter, with evident growth in lighting demands. Lighting products visibility reached about one to two months, the only positive development has been a “temporary halt in price falls”.

Sharp falls in LED share prices on the Taiwan bourse has caught Epistar Chairman B.J. Lee by surprise. Epistar shares have lost nearly 50% of its value recently. As a result the company’s investor relations department has received many phone calls from smaller investors requesting the company to implement treasury shares. The company board has decided to repurchase 20,000 company shares at prices ranging between NT $25 to NT $40 per share.

Based on Epistar’s current share value, it would roughly cost the company NT $310 million to repurchase 1% of its shares.

Competitor Everlight is also facing profitability challenges in 2Q15. The company reported revenues reaching NT $7.06 billion in 2Q15. However, net profits shrunk 45% to NT $308 million compared to 1Q15. On an annual basis, the company’s net profits plummeted 37% compared to the 2Q15, setting a new record low for the last nine quarters. Everlight’s EPS of NT $0.74 was slightly lower than financial institute estimations NT $0.9. The company’s accumulated net profits for the first half of 2015 reached NT $875 million, and EPS reached NT $2.05.

Financial institutes in Taiwan had lowered their estimations of Epistar and Everlight’s profits for 2015. Further observations will be required to determine whether the companies financial projections will be further lowered. 

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