Hynix profit tops forecasts on flash chip demand

SEOUL (Reuters) - South Korea's Hynix Semiconductor posted a better-than-expected quarterly profit on Thursday, helped by stable memory chip prices and soaring demand for flash chips, but the outlook appears shaky in 2006.

Third-quarter earnings slipped 3.5 percent from a year ago, but were more than double the previous quarter, partly helped by capital gains from overseas share holdings and stake sales.

It was the ninth consecutive quarterly profit for a firm that was on the brink of bankruptcy after the industry's worst downturn in 2000-2001.

Hynix earned 511.5 billion won (US$490.2 million) in the quarter ended 30 September, versus 530 billion won a year earlier and 238.4 billion won in the second quarter.

The result beat a forecast for 343.0 billion won by Reuters Estimates, boosted by capital gains from its investments at overseas subsidiaries and its stake sale in Hyundai Autonet, a car navigation system maker, the company added.

"The enhancement in the operating results was primarily attributed to DRAM price increase from the seasonal demand pick-up, the sales increase in fast-growing NAND flash memory and the unit cost reduction," Hynix said in a statement.

The strong results may bode well for its creditors' plan to sell a US$2.4 billion stake in Hynix, or 23 percent of the chip maker by the end of November.

Dynamic random access memory (DRAM) chip prices rebounded about 8 percent in the July-September period from the second quarter thanks to rising computer sales. Shipments of NAND flash chips, used in hot-selling music players and digital cameras, surged over 80 percent, although the average selling price dropped 18 percent, the company added.

But analysts were cautious about fourth-quarter earnings and the outlook for 2006, when prices of both DRAM and NAND chips are expected to weaken due to slowing demand growth and growing supply.

Sales were 1.49 trillion won, down 3.3 percent from 1.54 trillion won a year before.

In the NAND flash market, industry leader Samsung Electronics is holding prices down to woo electronics makers to use the erasable and rewritable memory chips, pressing smaller rivals to follow suit. Samsung controls nearly 60 percent of the NAND flash market.

For the full year 2005, Hynix's net profit is projected at 1.26 trillion won, down a quarter from last year's 1.69 trillion won due to lower DRAM prices that slid 40 percent by the end of September from a year before.

Hynix, which was rescued by 4.9 trillion won worth of bail-outs by creditors in 2000-2001, wrapped up a near four-year debt restructuring plan in July ahead of a schedule thanks to improving earnings.

Shares in Hynix climbed 35 percent in the third quarter, outpacing the broader market's 20 percent rise.

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