Innolux Corp., one of Taiwan’s leading flat-panel makers, has decided to reduce its paid-in capital, joining a growing number of companies listed on the local equity market in doing so, which analysts said was intended to boost their earnings per share (EPS).
In a news conference held Wednesday, Hung Jin-yang (???), chairman of Innolux, said his company had proposed to cut its capital size by NT$10.031 billion (US$337 million) or 9.5 percent, from the current NT$105.596 billion, which after the capital cut, will fall to NT$95.564 billion.
If the capital reduction plan is approved at an annual general meeting scheduled for June 24, Innolux will return NT$0.95 to its shareholders for every Innolux share they own.
Innolux will then reduce the number of outstanding shares by 9.5 percent while increasing each share’s value by a corresponding amount to keep the company’s overall market capitalization the same.
Hung said the capital reduction was expected to help Innolux adjust its capital restructure by adapting to changes in the market, and boost returns to its shareholders.
However, the capital cut will be for just this year and the company will not continue the capital reduction over the next three years, Hung added.
Innolux is the second prominent flat-screen supplier in Taiwan to announce a capital reduction in less than two months.
On March 28, AU Optronics Corp. (AUO) made a proposal to lower its paid-in capital by NT$19.25 billion, or 20 percent, from its current paid-in capital of NT$96.24 billion, resulting in a reduction of AUO shares in circulation to about 7.699 billion. AUO’s plan is pending approval from a shareholder meeting set for June 17.
Over the next three years, Innolux does not plan to spend a lot in capital expenditure to build new production lines, but will continue with digital transformation, smart manufacturing, and an upgrade in technologies to roll out value-added products and raise its competitive edge, said Hung.
In addition, the flat-panel maker has proposed issuing NT$1.05 in cash dividend per share for its earnings in 2021, when the company raked in NT$57.5 billion in net profit or NT$5.53 per share. The cash dividend payout will also need to be endorsed by shareholders on June 24.
Along with the capital reduction compensation, Innolux is expected to distribute a total of NT$2 in cash to its shareholders for every share they hold.
Innolux also announced a share buyback program, which will begin Thursday and continue until July 11, to buy back up to 50 million of its shares from the open market at a price range of between NT$9.66 and NT$22.98.
The company said the shares bought back from the market will be transferred to its employees as incentives to maintain its talent pool.
On Thursday, Innolux reported that it posted NT$1.9 billion in net profit for the first quarter of this year, down sharply by about NT$4 billion from the fourth quarter of last year and also down by more than NT$9 billion from a year earlier. Its EPS for the first quarter stood at NT$0.18.
The company said the falling profit partly reflected the traditional slow season, while geopolitical effects from a war being waged by Russia against Ukraine, rising inflationary pressure worldwide, and China’s lockdowns against COVID-19 infections also affected demand.
Looking ahead, Innolux said shipments are expected to grow in the second quarter as its clients are keen to build up their inventories to meet a rebound in demand expected for the second half of the year.
While the local equity market was hit hard by volatility on the U.S. markets with the benchmark weighted index on the Taiwan Stock Exchange plunging by 2.43 percent on Thursday, Innolux shares bucked the downturn, rising by 2.24 percent to close at NT$13.70 in the wake of the capital cut plan and the share buyback program.
Source: Focus Taiwan News Channel