Soaring copper prices to drag on Galaxy's profits

PUBLISHED : Monday, 29 May, 2006, 12:00am
UPDATED : Monday, 29 May, 2006, 12:00am

Chinese diode maker says it has taken steps to reduce cost impact on earnings

Listing candidate Galaxy Semi-conductor Holdings, a Chinese maker of diodes, would continue to see its gross profit margin hurt by soaring copper prices, executive director Yue Lian said yesterday.

Galaxy mainly manufactures diodes used in consumer electronics, information technology components and lighting products. Mr Yue said copper accounted for about 18 per cent of the company's turnover last year.

On Friday, copper futures for July delivery jumped 10.75 cents or 2.89 per cent to US$3.81 a pound, up 9.97 per cent from the week previous.

Mr Yue expected copper prices to continue surging this year in a volatile pattern. 'To reduce the impact, we have implemented several measures, including a shift of part of the cost to customers and adjusting the product mix,' he said.

Galaxy's net profit rose 21 per cent to 39 million yuan last year after surging 35.6 per cent to 32 million yuan in 2004. Gross profit margin, however, was squeezed to 26 per cent last year from 31.6 per cent in 2004.

Galaxy is offering 100 million shares at between 70 cents and 90 cents each, representing 5.6 times to 7.1 times last year's earnings.

The retail tranche of the offering starts today ahead of the listing on June 9. South China Capital is the listing sponsor.

Meanwhile, market sources said listing candidate printed circuit board maker TC Interconnect Holdings plans to offer 60 million new shares with an indicative price range of 95 cents to $1.25 each to raise up to $75 million.

The company, which is being brought to the market by CAF Securities, has brought in Kingboard Chemical as a strategic investor but the size of its stake has not yet been finalised.

Its net profit dropped 0.19 per cent to $37.28 million last year while turnover rose 17.73 per cent to $495 million.

TC Interconnect would kick off the retail tranche of the offering on June 12 and start trading on June 23, sources said.