Elpida Memory Inc., the world’s third-biggest maker of computer-memory chips, plans to cut debt and buy assets as a recovery in computer sales helps it post record profits a year after receiving a government bailout.

“We’ll seek opportunities including acquisitions and partnerships,” Executive Officer Takehiro Fukuda, who oversees finance and accounting at Tokyo-based Elpida, said in an interview at his office.
“We need to further expand the range of our business” in areas such as mobile phone and television chips, and we plan to cut our debt-to-equity ratio to 1 from 1.3 by yearend and eventually to 0.3, he said.
The manufacturer received a 30 billion yen ($341 million) capital injection from state-run Development Bank of Japan last year after slumping semiconductor prices led to a record loss in fiscal 2008.
Elpida expects record profits this financial year on increased sales as new mobile devices require more memory to process programs, President Yukio Sakamoto said last month.
Elpida said a year ago it would expand partnerships with Taiwanese makers of dynamic random access memory chips and improve its financial position under a Japanese government- backed revival plan that runs until March 31, 2012.
Bond prices reflect market confidence in the strategy, said Fukuda.
Elpida has 30 billion yen of securities maturing in December and may refinance them with convertible bonds or dollar notes, Fukuda said. The company registered to sell as much as 100 billion yen of bonds, according to a filing with Japan’s Finance Ministry on Dec. 14.
The extra yield investors demand to own Elpida’s 2.09 percent notes due in January 2012 instead of similar-maturity government debt fell 2 basis points to 191 basis points today, according to Japan Securities Dealers Association prices. The spread on its 2.1 percent bonds due in November 2012 narrowed 3 basis points to 222, the biggest decrease since June 29, JSDA data show.
“Our business plan until 2012 was approved, so bonds maturing before then” have more favorable spreads, Fukuda said. “Market prices show that those due after March 2012 are regarded as non-guaranteed.”
The company posted net income of 3.09 billion yen in the 12 months ended March 31 compared with a 178.9 billion yen loss a year earlier, the company said May 12.
“Their restructuring is welcome,” said Yuichi Ishida, an analyst at Mizuho Investors Securities Co. in Tokyo. “Elpida has to improve a weak balance sheet. They also need to improve cost-competitiveness.”
The Japan Credit Rating Agency revised Elpida’s outlook to stable from negative on June 22, saying its financial structure will “significantly” improve on demand for DRAM -- chips that serve as short-term memory inside computers.
“We shouldn’t rely on state support, but we have to compete with rivals in Korea or Taiwan where government support is expected,” said Fukuda. Even after March 2012 “we expect implied support from our government.”
Elpida gained 60 yen, or 4.5 percent, to 1,391 yen in Tokyo today, the biggest increase since June 3. The Nikkei 225 Stock Average advanced 0.8 percent to 9,338.04.
(Source: Bloomberg)