Delta Electronics Inc (台達電) yesterday reported record third-quarter results after the power and thermal solutions provider raised prices.
Net profits rose 86 percent quarterly and 11 percent annually to NT$6.09 billion (US$196.55 million), with revenue of NT$63.62 billion, up 10 percent from the previous quarter and 6 percent higher compared with a year ago. Earnings per share were NT$2.35.
The gains were primarily driven by a rise in passive components sales and higher pricing for power electronics, Delta chairman Yancey Hai (海英俊) told an investors’ conference in Taipei.
Since the end of the first half of the year, Delta has been renegotiating with customers to raise prices by 3 to 5 percent to reflect shortages and rising costs of labor and raw materials, Hai said.
More favorable pricing supported profitability growth, with gross margin improving by 2.8 percentage points to 27.9 percent, leading to NT$17.8 billion in gross profits, up 23 percent from a quarter ago and 10 percent from a year earlier.
Operating margin for the quarter rose from 6.1 percent at the end of June to 9.4 percent, with operating profits soaring 70 percent to NT$5.9 billion and besting last year’s performance by 9.4 percent.
“We could see modest gains in revenue for this quarter, supported by robust demand for data center, communication, passive components and automotive electronics,” Hai said, as he gave an optimistic outlook on margins.
The power electronics business, which accounts for 52 percent of the company’s top line, rose 17 percent last quarter, but industrial automation dipped 6 percent.
“Part of that is cyclical, but some of our Chinese customers have cut back procurement due to trade war uncertainties,” Hai said.
“Delta is a business-to-business enterprise and it is up to our customers to gauge the impact on end-consumer demand,” Hai said, adding that the outlook remained murky.
As for automotive electronics and electric vehicles, a new area the company has been developing, revenue contribution to date this year has tripled, he said.
The new business accounted for just about 1 percent of its top line, but order visibility in the next two to three years is clearer, he added.
However, much like its experience in the PC sector, Delta is prepared to bear the pressure of yearly price cuts demanded by customers.
“We are fully prepared to cut prices by as much as 5 percent each year, for a number of years,” Hai said.
The situation would be helped by the still-sizable price premium for electric cars over conventional automobiles, he said.
Another area company is looking at is future 5G networks, which would bring new product specifications across the supply chain.
“5G is coming a lot quicker than we think,” Hai said.
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