Machine-tool Industry Flooded with Orders in Q1

A reduction in the volatility of raw-materials prices helped Taiwan' s first-tier machine-tool makers, including the Victor Taichung Machinery Works Co., Tong-Tai Machine & Tool Co., Roundtop Machinery Industries Co., Goodway Machinery Corp., and AWEA Mechantronic Co., chalk up a robust performance in the first quarter of this year.

The manufacturers report that the flood of orders from the first three months of the year is spilling over into the second quarter.

Today' s optimism is in sharp contrast to the gloomy mood at the beginning of the year, when expectations were for a continuation of last year' s slow growth. The mood brightened during the first quarter, and manufacturers began predicting a growth of 8% for the year. Now, they have upped the projection to 10%.

Local machine-tool manufacturers have lost orders over the past two years, reports Victor Taichung president Bert M.H. Huang, as buyers flocked to mainland China in pursuit of cheaper prices. Many of the orders have come back to Taiwan, however, after unpleasant experiences with inferior quality and tardy delivery by Chinese suppliers.

Another factor in Taiwan' s resurgence is that manufacturers in Japan are too busy filling domestic demand to devote much time to international sales, leaving extra room for Taiwanese machine tools in the global marketplace.

AWEA and Roundtop, among other suppliers of large machine tools, report increased big-ticket orders in the first quarter. Tong-Tai reported a flood of orders for printed-circuit-board machines, and Victor Taichung recorded a stellar performance in selling plastic injection molding machines.

Victor Taichung reports NT$1.073 billion (US$33.53 million at NT$32:US$1) in sales during the first quarter, up 11% over the same period of 2005, and earnings-per-share of NT$0.5 (US$0.015) for the period.

Victor Taichung has NT$1.1 billion worth of orders in hand. Among them are orders for vertical lathes worth NT$200 million (US$6.25 million) from two domestic manufacturers, and an order for 10 sets of horizontal machining centers from the KIA Motor Co. of South Korea.

The Falcon Machine Tools Co. says that its pretax earnings in the first quarter reached NT$36.42 million (US$1.13 million), or NT$0.53 (US$0.016) per share. This contrasts sharply with an operating loss of NT$18.64 million (US$582,500) in the same period of last year.

P.M. Chang, Falcon' s chairman, wants his company to become a manufacturer of automated production systems focusing on exports of tailor-made whole-plant equipment. The company reports enough orders in hand to keep its production lines humming for four months, and sales are expected to post a further improvement in the second quarter.

Thanks to ongoing overseas demand, Roundtop chalked up a year-on-year growth of 66.76% in the first quarter, with pretax earnings reaching NT$57.46 million (US$1.79 million) for the period. After-tax earnings for the three months amounted to NT$44.9 million (US$1.4 million), yielding NT$0.77 (US$0.024) per share. One institutional investor expects the company' s after-tax EPS to reach NT$3 (US$0.093) for the year as a whole.

Fan Kuei-chu, who heads up Roundtop' s management department, says that carmakers in the United States and Europe are scouring the world for cost-effective production equipment that will help them reduce production costs. In addition, she reports, the company has received an influx of orders from emerging markets such as Turkey and Pakistan—enough, in fact, to fill production capacity for more than three months.

AWEA claims to have taken orders worth more than NT$400 million (US$12.5 million) in April alone, and to have a total of NT$1.2 billion (US$37.5 million) worth of orders in hand. This is enough to keep production lines busy until the end of August.

The company posted sales of NT$690 million (US$21.56 million) in the first quarter of this year, up 10.6% from the same period of 2005. After-tax profits amounted to NT$1.3 (US$0.04) per share. An institutional investor predicts that AWEA' s sales for all of this year will challenge the NT$3.3 billion (US$103.12 million) mark, for a 20% gain on 2005.

At Tong-Tai, sales for the first quarter reached NT$1.187 billion (US$37.09 million) and after-tax earnings amounted to NT$113 million (US$3.53 million), giving an EPS of NT$0.9 (US$0.028). Sales in March alone hit a monthly record high of NT$426 million (US$13.31 million).

The company claims to have NT$1.5 billion (US$46.87 million) worth of unfilled orders in hand, including NT$300 million (US$9.37 million) worth of orders for new products such as polishing machines and LCD exposure equipment. (May 2006)