Hoya: 4Q 05/06 operating profit up 26% but market unhappy

Japan“s Hoya Corp. said on 20 April 2006 that its quarterly operating profit rose 26% thanks to strong demand for camera lenses and glass for making semiconductor chips, liquid crystal displays and h…

Japan“s Hoya Corp. said on 20 April 2006 that its quarterly operating profit rose 26% thanks to strong demand for camera lenses and glass for making semiconductor chips, liquid crystal displays and hard drives, but the result did not come up to analysts“ expectations. Hoya, one of Japan“s most profitable technology firms, enjoyed a large rise in the sales of lenses for camera-equipped mobile phones in the January-March 2006 quarter. Demand for magnetic disks for data storage was also strong. The company reported higher orders for mask blanks, which are glass substrates used in chip production, and for photomasks, which are used to copy circuit patterns onto LCD panels. Its spectacle lens business also performed well, posting strong growth overseas. Hoya“s chief financial officer said the 1H of the 2006/07 fiscal year looked promising on strong demand for LCD TVs and other electronics items. “We can see about six months out, and things look pretty good until then,” Hoya Chief Financial Officer Kenji Ema told reporters. “The 2H is a bit uncertain, but we should be able to achieve sales growth in the high single digits (this business year).” Hoya, which is more than half-owned by foreign investors, said group operating profit was JPY 24.04 billion (USD 204.5 million) in the January-March 4Q, up from JPY 19.14 billion a year earlier. Sales increased 17.2% to a record high of JPY 90.2 billion. However, the profit figure was off the market consensus of JPY 26.25 billion. For the full year ended March 2006, Hoya posted a 19% rise in group operating profit to a record JPY 101.1 billion on sales of JPY 344.23 billion, up 11.7%. Hoya is estimated to control about 85% of the global market for mask blanks and more than half of the market for LCD photomasks, which are selling well as LCD makers actively develop new models and start new production lines. But Mr. Ema warned of stiffer price competition in LCD photomasks. LCD panel makers are looking to pressure their suppliers into cost cutting as retail prices of LCD TVs fall by about 25% a year. Hoya“s rivals in LCD photomasks are Kyoto-based SK-Electronics Co. and South Korea“s LG Micron. “Pricewise, things are getting tough,” Mr. Ema said. “You may be able to boost volumes but there is a risk that price falls will wipe those gains out.” Mr. Ema said Hoya planned capital spending of about JPY 50 billion in 2006/07, roughly equal with the JPY 48.7 billion invested in the previous financial year.