Hoya: 2Q 2004 profit hits record high

Japanese optical products maker Hoya Corp. said its quarterly profit rose 41% to a record high on strong sales of camera lenses and glass for hard disk drives and LCDs, but it reiterated that earnings…

Japanese optical products maker Hoya Corp. said its quarterly profit rose 41% to a record high on strong sales of camera lenses and glass for hard disk drives and LCDs, but it reiterated that earnings could slow in the 2H of fiscal 2004. The world“s leading maker of glass lenses for digital cameras and photomasks for LCDs, Hoya is concerned about signs of softness in the digital camera market and a potential surplus of LCDs. “If you asked me if sales and profits will continue to grow in the third and 4Q like they did in the first two, my answer would be “no“. We“ll probably see a bit of a slowdown,” Hoya Chief Financial Officer Kenji Ema told a news conference. Ema“s warning about the 2H 2004 echoed a similar statement he made in July 2004 when Hoya issued its 1Q fiscal 2004 earnings, citing worries that demand for consumer electronics would fall after the Olympic Games. Hoya, one of Japan“s most profitable firms and 50%-owned by foreign investors, said group operating profit came to JPY 23.05 billion (USD 212.6 million) in the three months to 30 September 2004, against JPY 16.4 billion a year earlier. Sales rose 15.8% to JPY 78.49 billion. Hoya will not give a full-year forecast until it unveils 3Q 2004 results in January 2005. The market consensus is for operating profit to rise 24% to JPY 84.48 billion. However, Ema tried to downplay expectations, noting that competition was intensifying in both the LCD and digital camera markets, putting pressure on prices. That could eventually reduce demand for Hoya“s LCD photomasks and camera lenses. “We can envision a scenario in which the Christmas shopping season is sluggish, leading to an inventory correction in the January to March quarter and hurting our sales,” Ema said. GLASS DISKS STRONG Hoya recorded an operating profit of JPY 44.13 billion for the 1H 2004, up 42.6% year-on-year and better than its forecast of JPY 42 billion . In addition to strong sales to the camera and LCD industries, Hoya has been unable to keep pace with demand for glass disks used in hard disk drives even after its acquisition of Nippon Sheet Glass Co.“s glass disk business in 2003. Glass disks are mainly used in PCs, but demand is also being pushed by smaller hard drives such as those inside Apple Computer“s iPod music player and a new source of demand is expected when drives eventually go into mobile phones. Ema said disk sales jumped 120% in the 2Q 2004 year-on-year and were up 18% from the previous quarter. He said Hoya was boosting output for glass disks at existing factories, which are now running at full capacity. In response to a question about whether Hoya would build a new disk plant, Ema answered: “There is nothing that I can announce at this time.”