Hon Hai Precision Industry Co (鴻海精密) yesterday reported that its net income surged 55.47 percent year-on-year to NT$30.38 billion (US$992.42 million) last quarter, marking the highest profit for the January-March quarter in the company’s history.
The iPhone assembler’s earnings results beat market expectations of NT$28.36 billion. Earnings per share were NT$2.05 last quarter, compared with NT$1.33 a year earlier, the company said.
However, last quarter’s figure was 46.42 percent lower than the NT$56.71 billion it made in the previous quarter due to slow season effects.
Hon Hai’s gross margin of 7.14 percent last quarter outpaced consensus estimates of 6.8 percent and was higher than another iPhone assembler Pegatron Corp’s (和碩) 6.9 percent.
The company had maintained a gross margin of more than 7 percent for four consecutive quarters, according to its filings with the Taiwan Stock Exchange. Morgan Stanley attributed Hon Hai’s margin performance to better product yields and improved production efficiency.
The company’s board yesterday approved a proposal to distribute a cash dividend of NT$3.8 per share and a stock dividend of 5 percent based on last year’s net income of NT$132.48 billion, or NT$8.85 per share.
This marks the highest cash dividend in Hon Hai’s history. The company said it would distribute a total of NT$56.21 billion in cash to shareholders.
The planned dividend distribution translates into a cash payout ratio of 42.93 percent and a yield of 4.08 percent, based on the firm’s closing price of NT$93.10 yesterday.
Last year’s cash payout ratio was 22.05 percent.
Hon Hai’s board also approved a plan to issue overseas convertible bond of less than US$800 million this year, saying it would use the proceeds to purchase components from overseas, the company said in a filing with the Taiwan Stock Exchange.
In a note issued on Sunday, Morgan Stanley said it expects Hon Hai’s revenue this quarter to stay flat from last quarter’s NT$1.014 trillion, citing declining iPhone shipments and flattish growth in iPad shipments.
Hon Hai’s non-iPhone handset sales would grow quarter-on-quarter this quarter to offset the impact of slowing iPhone shipments at a time when Apple Inc is going through a product transition this quarter, Morgan Stanley analyst Jasmine Lu (呂智穎) said.
However, the company is likely to lose order allocation to Pegatron for Apple’s next-generation iPhone, which will slow down Hon Hai’s growth potential in the second half of this year, Lu said.
Hon Hai may also see falling contribution from Apple in the second half of the year because of declining iPad shipments, JPMorgan Securities Ltd said in a recent report.
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