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Published on February 20, 2008

Delta Electronics (Thailand) reported a 60.85-per-cent jump in its net profit to Bt3.16 billion last year.

The outstanding performance was a result of the company focusing on manufacturing Delta Energy System (DES) telecom power supplies and systems offering high margins, the company said yesterday.

The company is the Thai unit of Taiwanese-based global giant the Delta Group.

It said that like other export-oriented companies in Thailand, its sales fell 22.46 per cent, from Bt43.55 billion in 2006 to Bt33.77 billion last year, due mainly to the appreciation of the baht. The local currency has strengthened a further 3.58 per cent against the US dollar this year, it said.

The company's strategy last year was to concentrate on higher-end power supplies in DES's range of telecom power supplies and power systems while reducing its interest in comparatively low-margin items.

Products like liquid-crystal-display television sets and other video-display items also experienced lower sales last year.

"Sales of DES's products increased about 13.9 per cent in baht terms and 22.8 per cent in dollar terms from the previous year. In baht terms, video-display group sales fell about 70 per cent, while those of the switching-power-supply group declined 15.5 per cent. This was only 6.5 per cent off in dollar terms. Sales of component products decreased 6.4 per cent in baht terms but showed a 3.9-per-cent increase in dollar sales," said an official at Delta Electronics (Thailand).

Despite the lower sales, the company's costs of goods sold fell last year, and its net profit surged significantly, indicating that its strategy of focusing on higher-margin products was paying off.

"The firm's costs of goods sold fell to 77.7 per cent, from 81.4 per cent in 2006. The main reason was the change in sales mix, by having a greater sales contribution from higher-end power supplies in the DES product group. The overall gross profit margin, as a result, went up from 18.6 per cent in 2006 to 22.3 per cent in 2007," said the official.

The company also recorded a foreign-exchange gain of Bt274 million and net interest income of Bt83 million last year.

Trinity Securities said in a note it was recommending "buy" on Delta Electronics shares, with a fair value of Bt31 apiece.

Although the company's sales fell 22.5 per cent, its net profit rose 60.85 per cent, which demonstrated that the company's strategy of concentrating on higher-margin products was correct.

The broker said even though Delta would pay a lower dividend than market expectations, the company's higher-than-expected growth and the robust nature of the Indian telecommunications industry might lead it to revise its earnings estimates upwards in the future.

The broker predicts Delta will record net profits of Bt3.29 billion this year and Bt4.02 billion next year.

The Nation