Wed, May 16, 2012 - Page 11 News List

Foxconn profits rise as affiliate’s margins drop

BIG BOOST:Foxconn, the supplier to major league computer brands including many of Apple Inc’s iconic products, has reported better-than-expected profits

BY Kevin Chen  /  Staff reporter

Foxconn Technology Co (鴻準), a major supplier of metal casings for laptops and cellphones, yesterday reported better-than-expected profits and margins for the first quarter of the year, in contrast to its affiliate Hon Hai Precision Industry Co (鴻海), which on Monday reported a record low margin for the quarter.

Net income rose 11.37 percent quarter-on-quarter, or 11.43 percent year-on-year, to NT$2.54 billion (US$86 million) in the first quarter, according to Foxconn Technology’s financial report which was released yesterday.

Earnings per share (EPS) were NT$2.16 in the first quarter, which was higher than the NT$1.95 the company posted in the previous quarter and NT$2.05 for the same period of last year.

Foxconn, which supplies metal cases for Apple Inc’s iPad and MacBooks, also produces casing products for high-end notebook computers manufactured by Hewlett-Packard Co and Acer Inc (宏碁), and assembles games consoles for Japan’s Nintendo Co.

Foxconn reported a 53.1 percent decline in consolidated revenue in the first quarter from the prior quarter to NT$20.82 billion, but thanks to rising shipments in metal cases, which command higher margins than game-console assembly, it saw gross margin rise to 14.16 percent in the first three months of the year, from 7.23 percent recorded in the previous quarter, while its operating margin also climbed to 8.59 percent in the first quarter, compared with 3.63 percent in the final quarter of last year.

During the same period of last year, the company posted 9.07 percent in gross margin and 5.65 percent for operating margin, according to Foxconn’s report.

Shares in Foxconn Technology fell 1.35 percent to NT$94.7 yesterday, which was better than Hon Hai — which saw shares shed 1.73 percent of their value dropping to NT$85.4, the lowest close since Jan. 16 — after the firm posted its lowest margins on record, the Taiwan Stock Exchange’s data showed.

On Monday, Hon Hai, which makes Apple’s smartphones and tablet computers, said its gross margin fell to 6.64 percent in the first quarter, declining from 8.89 percent in the prior period and down from 7.24 percent a year earlier.

Operating margins also halved to 1.52 percent from 3.3 percent a quarter earlier and was down from 1.74 percent the year before, the company said in a statement.

In the first three months, Hon Hai’s earnings per share were NT$1.40, down from NT$3.18 registered in the previous quarter and NT$1.49 percent a year ago.

Credit Suisse said Hon Hai’s wage hikes in China and customers’ product transition had resulted in its declines in margins and earnings per share.

Hon Hai “was in the final stages of its transition project which we assume is primarily its inland expansion [in China],” Credit Suisse analyst Thompson Wu (武光明) said in a note yesterday.

The brokerage forecast Hon Hai’s second-quarter sales would drop 11 percent from the previous quarter, due to slower demand of Apple’s current iPhone line and the likely delay in new iPhone models. “Its visibility remains short, which is likely due to global uncertainties led by Europe,” Wu wrote.

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