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Hynix profits boosted by China fire accident, but miss estimates

SKHynixSK Hynix, the world’s second-largest memory chip-maker by sales, has reported record operating profit for the second consecutive quarter, as higher chip prices caused by fire in Chinese plant offset lower production.

The company reported a 1.16 trillion won ($1.1 billion) operating profit in the three months from July to September, compared with an operating loss of 24 billion won in the same period a year ago. Operating margins for the quarter rose from a contraction of 1% to growth of 29% year-on-year. The group’s net profit jumped from 2 billion won to 958 billion won, while sales rose by 68.5% to 4.08 trillion won.

The South Korean company expects ram chip prices to remain strong amid the industry’s constrained production mainly due to the accident. Hynix, whose technology is found in gadgets made by Apple and Sony, today reported that its average selling prices of ram chips rose 5% in the third quarter.

However, the company’s earnings missed analyst estimates as ram memory shipments fell 2% from the second quarter, due to the fire in China. Analysts consensus forecasts were for a 988 billion won net profit. Net income, excluding minority interest, rose to 958.3 billion won ($903 million) for the period from 1.9 billion won a year earlier, Icheon, South Korea-based SK Hynix said today.

Analysts predict that the companys earnings growth will fall back in the final quarter of 2013, when the group is likely to feel the full impact of the Chinese fire.

“Potential delay of restoration at the fire-damaged plant signals the overall memory chips will remain in shortage in the fourth quarter and well into the first quarter,” Nam Dae Jong, a Hana Daetoo Securities Co. analyst, said in Seoul today. “SK Hynix’s earnings will deteriorate in the fourth quarter due to the fire.”

The raising price recovery helped Hynix’s bigger rival Samsung Electronics post a 12% increase in third-quarter revenue from its semiconductor division while its operating profit from the division more than doubled to 2.1 trillion won.

Hynixs shares have risen more than 35 per cent over the past 12 months and have been up this morning by 1.5% at Won 33,100. is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

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