Lite-On Technology Corp (光寶科技) yesterday announced that its board of directors has approved plans to book asset impairment losses of NT$6.98 billion (US$229.23 million) as it scales down its handset casing business.
The impairment amount is comprised of NT$5.17 billion from the 2007 acquisition of Finnish handset casing maker Perlos Corp and NT$1.81 billion from disposing a part of the company’s production equipment according to actual capacity utilization, it said.
“The handset landscape has evolved rapidly since 2007, with demand for casing materials shifting from plastic to metal, to glass and ceramic,” Lite-On chief executive officer Warren Chen (陳廣中) told a news conference at the Taiwan Stock Exchange.
The loss is expected to affect the company’s third-quarter earnings per share performance by NT$3, Chen said.
As the impairment loss is booked under nonoperating income, the company’s overall earnings during the period would not be affected, Chen said.
“We are still expecting to turn a profit in the third quarter,” Chen said, adding that operations and employees’ salaries would not be affected.
Lite-On plans to scale down its handset casing business and focus on making handset components, as well as components for automotive electronics and other communications applications, Chen said.
While it plans to keep a portion of its existing plastic handset casing production capacity to secure ongoing revenue streams with its current clients, the company said it has no plans to move into glass and ceramic casings, as this area is no longer its priority.
Although plastic casings are no longer used for most smartphones and the material has been relegated to feature phones without advanced functionality, the company would continue to produce smartphone casings made of plastic and metal for its customers, Chen said.
The change is part of the company’s shift to streamline its business to focus on fewer areas, Chen said, adding that the move would bring NT$500 million in depreciation costs next year.
Part of the firm’s phone casing business could be repurposed to produce smartphone components, Chen said, adding that the change would not lead to diminished sales.
The repurposed production lines are expected to turn a profit in the near term, Chen said.
As of the end of the first half of the year, the company had about NT$31.1 billion in cash and a similar dividend payout as this year is expected next year, Chen said.
Lite-On shares dropped 0.68 percent in Taipei trading yesterday, ahead of the company’s news conference.
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