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TPK shares boosted by 1st-quarter profit news

TAIPEI -- Shares of TPK Holding Co. outperformed the broader market on Wednesday after the touch panel maker announced a day earlier that it turned a profit in the first quarter, dealers said.

The buying also reflected optimism that demand for panels will rise in the second half of this year, when 4G telecom services in Taiwan will trigger a round of smartphone replacements and sales of wearable devices could grow sharply, they said.

Shares of TPK rose 2.47 percent to close at NT$228.50 (US$7.54), with 18.36 million shares changing hands, while the weighted index on the Taiwan Stock Exchange ended down 0.19 percent at 8,956.92.

The stock opened higher after the company released its first quarter results on Tuesday, and the momentum continued to the end of the session, even as the broader market faced strong resistance and fall into negative territory after briefly breaching the 9,000-point mark.

TPK announced at its quarterly investor conference a first quarter net profit of NT$129 million, or earnings per share of NT$0.39, after posting a net loss of NT$1.61 billion, or a loss per share of NT$4.88, in the fourth quarter.

Analysts said the improved results stemmed from TPK's efforts to cut costs in the first quarter to offset the impact of slow season effects in the global touch panel business.

As of the end of March, TPK had cut its workforce by 14,000 to about 39,000 employees, helping slash the company's operating expenses to NT$2.38 billion from NT$2.84 billion in the fourth quarter of 2013.

Although TPK's consolidated sales in the first quarter fell 36.4 percent from the previous quarter to NT$26.62 billion on inventory adjustments by its clients, its gross margin and operating margin improved to 10 percent and 1.1 percent, respectively, from 7.2 percent and 0.4 percent a quarter earlier.

Expecting slow season effects to continue affecting the touch panel business in the second quarter, TPK said its consolidated sales for the quarter will be little changed from the first quarter or increase 5 percent at best.

Its operating margin in the second quarter will be around 1 percent, the company said.

TPK expected the second half to be better because of anticipated growth in wearable devices and 4G telecom services, which should boost demand for devices with touch panels.

A new plant located is Fujian province is scheduled to begin mass production in September to meet rising demand in the second half, TPK said.

TPK's capital expenditure totaled NT$3.27 billion in the first quarter and will end up at about NT$15 billion for the year as a whole, the flat panel maker said.

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