Will Chunghwa further lose on foreign currency derivatives contract?
Chunghwa Telecom, Taiwan's largest phone operator, said it wrote off NT$3 billion ($97 million) for losses from a foreign-currency derivatives contract because of a stronger Taiwan dollar.
Chunghwa had accumulated losses of NT$4 billion as of Feburary 29 on the 10-year contract signed in September, widening from NT$1 billion at the end of January, the company said. Taipei-based Chunghwa's operations aren't affected by the losses, Chief Financial Officer Joseph Shieh said on a conference call.
Under the terms of the contract, Chunghwa is required to pay cash to an unidentified investment bank if the Taiwan dollar appreciates to less than NT$31.50 per U.S. dollar, while it would receive cash if the rate is between NT$31.50 and NT$32.70.
Taiwan's currency gained 3.9 percent against the U.S. dollar last month and closed at NT$30.950, according to Taipei Forex.
Chunghwa will book the loss in the first quarter, Shieh said. Losses could widen to as much NT$7.6 billion over the life of the contract if the currency strengthens to NT$27 against the U.S. dollar, he said.
The company is in discussions to revise the contract terms, he said. Shieh declined to confirm or deny a Commercial Times report that named Goldman, Sachs as the counterparty.
The phone operator also said its net income in February fell 47 percent from a year earlier to NT$1.9 billion because of the currency loss, while sales climbed 3.6 percent to NT$16 billion.
Are these symptoms of bigger problems brewing for Chunghwa?
Chunghwa had accumulated losses of NT$4 billion as of Feburary 29 on the 10-year contract signed in September, widening from NT$1 billion at the end of January, the company said. Taipei-based Chunghwa's operations aren't affected by the losses, Chief Financial Officer Joseph Shieh said on a conference call.
Under the terms of the contract, Chunghwa is required to pay cash to an unidentified investment bank if the Taiwan dollar appreciates to less than NT$31.50 per U.S. dollar, while it would receive cash if the rate is between NT$31.50 and NT$32.70.
Taiwan's currency gained 3.9 percent against the U.S. dollar last month and closed at NT$30.950, according to Taipei Forex.
Chunghwa will book the loss in the first quarter, Shieh said. Losses could widen to as much NT$7.6 billion over the life of the contract if the currency strengthens to NT$27 against the U.S. dollar, he said.
The company is in discussions to revise the contract terms, he said. Shieh declined to confirm or deny a Commercial Times report that named Goldman, Sachs as the counterparty.
The phone operator also said its net income in February fell 47 percent from a year earlier to NT$1.9 billion because of the currency loss, while sales climbed 3.6 percent to NT$16 billion.
Are these symptoms of bigger problems brewing for Chunghwa?
posted by Charltonmedia.com @ 5:52 PM
<< Home