Delta expanding into solar power - $200m budgeted for US, EU acquisitions

www.bangkokpost.com
15/08/2009

Delta Electronics (Thailand) Plc has been in talks to acquire US and European solar energy equipment makers as it has earmarked $200 million to diversifying into electrical power over the next two years. "If you want to do business in the US, you have to acquire a US company. And if you need more market share in Europe, you have to do the acquisitions," Delta president Henry Shieh said yesterday.

"We are discussing with companies in the US and Europe in terms of shares and prices to make sure we do it right. About $100 million could be spent before 2012 and we have the capacity to double the amount." Those companies, according to Mr Shieh, are $500-million businesses that are now having financial problems because of lower subsidies from governments in the face of the global recession.

Delta, the largest electronics firm on the Stock Exchange of Thailand by revenue and market capitalisation, says market conditions and its financial results have become more favourable for making new investments. The market started to come back in June and July with some stocks depleting. Some urgent orders are placed this month, indicating that the demand is there, said Mr Shieh. "At least we feel more comfortable now with our performance is getting better and moving toward the right trend," he noted. "Our cash on hand of over 8 billion baht also supports our investments."

Anusorn Muttaraid, Delta's executive director, said the talks with the US company were expected to be concluded this quarter while negotiations with European parties could finish in the final quarter. "The deals are targeted to cost less than 3 billion baht. At least we will have these two deals done this year," Mr Anusorn said. "Through the acquisition, Delta would not only acquire the plants but also the market and technology from the US and Europe."

Delta yesterday reported a net profit of 301 million baht in the second quarter, down by half from 621 million in the same period of last year, as revenue fell 27% to 6 billion baht. In the first six months, earnings dropped to 812 million baht from 1.42 billion a year earlier as revenue decreased 22% to 12.42 billion baht. Mr Anusorn said the company forecast that 2009 revenue would be about $900 million, down from $1 billion made in 2008. Mr Shieh said Delta aimed to double its revenue to $2 billion in 2013.

Its plants are currently running at 65% of the maximum capacity, compared with 85% the same period of last year, he added. KGI Securities said Delta's earnings in the quarter to June were in line with the expectations, off 41% from the first quarter, while its gross margin edged down from 25.8% to 26.4%. "Despite weak earnings in the second quarter, Delta's balance sheet remains robust with a debt-to-equity ratio of 0.5 times. The company also has hefty cash on hand of 8.1 billion baht while short-term debt amounts to only 1.3 billion, without long-term debt," KGI said in a report.