Hynix profits jump 36% on D-Ram demand

Hynix Semiconductor, the world’s second-largest memory chipmaker, on Thursday reported a 36 per cent jump in quarterly profit, driven by higher shipments of memory chips.

Hynix is the only big South Korean technology company that has reported positive results for the past quarter. Others, such as Samsung Electronics and LG Electronics, struggle to cope with lower prices of mobile phones and flat panel displays.

“Despite [the fact that] it was traditionally slow season, D-Ram price held up relatively firm, primarily due to the industry-wide limited supply,” the company said.

Hynix posted a Won324.4bn ($341m) net profit in the second quarter, compared with Won238.4bn a year ago. Sales rose 27.8 per cent to Won1,577.5bn.

“The company performed relatively well, although the results fell short of the market’s inflated expectations,” said Lim Hong-bin, an analyst at Mirae Asset Securities. “Its operating profit is likely to show a steady increase in the second half on sales growth and cost reduction.”

Hynix said shipments of D-Ram chips used in personal computers surged 20 per cent, with a 1 per cent increase in average selling price. The average price of Nand flash memory chips used in digital cameras and MP3 players tumbled 44 per cent amid oversupply but the price decline was offset by an 84 per cent jump in shipments.

“A global comparison of tech companies points at a relative outperformance by pure D-Ram/Nand players in terms of second-quarter results. Hence, we still prefer pure plays,” Merrill Lynch said in a report.

Last week, Samsung Electronics, Hynix’s bigger rival, posted an 11 per cent drop in quarterly net profit, hit by falling handset margins and weaker Nand chip prices. LG Electronics swung to a net loss in the second quarter, due to lower-than-expected LCD sales and falling handset prices. LG Philips LCD, the world’s second-largest flat-screen maker, reported a record loss in the last quarter on weaker-than-expected World Cup sales.

Separately, KT&G, South Korea’s largest tobacco and ginseng maker, reported a 16 per cent rise in second-quarter net profit, helped by stronger sales of higher-priced cigarettes. The former state monopoly forecast stronger earnings in the second half, citing rising domestic market share and robust exports.

Increasing profitability and the bright outlook are likely to dim the prospect of Carl Icahn and his associates winning support for their plan to take over the company. The activist shareholders, who own a 7.66 per cent stake in KT&G, have offered to buy KT&G for Won60,000 per share, but the proposal was rejected by the company.

KT&G is set to announce its new business strategy next month to increase corporate value and fend off the hostile bid by Mr Icahn, following a study by Booz Allen Hamilton, a US consulting firm, into its operations.