Korea's Hynix profits down to $53m

Hynix slump in profits didn't stop its stock, which leaped 15 percent the second day in a row

By Staff and wire reports

SEOUL, South Korea - Hynix Semiconductor said its operating profit slumped 78 percent for the first quarter.

But that didn't stop its shares from roaring to their daily limit Thursday for the second straight day. They closed up 15 percent at 3,205 won.

Those gains, helped by good news from U.S. stocks and chipmakers like Intel, helped it outdo South Korea's benchmark Kospi index, which closed up 4.3 percent at 563.31.

Hynix, the world's second-largest memory chipmaker, blamed lower chip and flatscreen prices for the profit drop.

A debt-dealing plan

Its earnings fell to $53.3 million, or 70 billion won, before adjusting for interest and taxes. That's down from 323 billion won for the same quarter last year.

Analysts said investors bought shares on faith in its new funding plans.

CEO Park Chong-sup said Hynix aims to raise 1.5 trillion to 1.8 trillion won in the first half of 2001, in the face of hefty maturing debt.

Hynix plans to repay 2.76 trillion of its 5.67 trillion won in maturing debt this year, with creditors expected to roll over the rest.

He also reaffirmed plans to spin Hynix off from the Hyundai Group by the end of June. That will separate Hynix, formerly called Hyundai Electronics Industries, from financially troubled siblings.

Hynix is struggling to free itself of a large amount of debt accumulated during the Asian financial crisis. It took on a lot of that in absorbing LG Group's semiconductor arm in 1999.

Its U.S. subsidiary defaulted on a $57 million payment at the end of February.

Mixed reaction

Some analysts remain skeptical.

"Investors should think about whether or not Hynix is financially safe and whether its fund-raising plan is realistic," said Woo Woung-moo at J.P. Morgan Chase. "This momentum (in stocks) will be short-lived."

Hynix's results were hurt most by a fall in semiconductor sales, which accounted for 71 percent of its first quarter revenues.

Chip sales fell 21 percent year on year to 1.25 trillion won. That reflected a slowdown in global personal-computer demand and inventory clearing by distributors, Hynix said.

"We have conflicting forecasts about when the chip industry will pick up," said Sang Park, Hynix's chief operating officer. "But I believe the worst is over."

Though inventories have stabilized, Hynix is having trouble with low prices for its dynamic random access memory, or DRAM, chips. They are only selling for around $3.1 apiece, when productions costs are around $3 level.

"The overall chip market remains relatively weak," CEO Park said. "We may continue to experience weak DRAM prices in the second quarter."

Its sales of flat-screen liquid crystal displays were also hurt by low prices. Its sales of 111 billion won were down 31 percent from the previous quarter, to 111 billion won. But they were up 6 percent from this time last year.

Hynix CEO Park said it expected a full-year preadjusted profit of 2.5 trillion to 4.2 trillion won, depending on global chip prices.

Reuters contributed to this report.

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