Giant Manufacturing Co Ltd (巨大機械) might face weak demand this year, especially in China, as well as currency fluctuation and inventory issues, analysts said yesterday, after the world’s biggest bicycle maker reported disappointing quarterly results.
Net profit fell 18.8 percent year-on-year to NT$846 million (US$26.09 million) last quarter, or NT$2.26 per share, and sales declined 6 percent to NT$13.1 billion. Its gross and operating margins also slid to 22.2 percent and 6 percent respectively, the company reported on Friday last week.
For the full year, Giant’s net income reached NT$3.84 billion, or NT$10.25 per share, down from NT$4.11 billion, or NT$10.96 per share, in 2014. Consolidated revenue was NT$60.42 billion, up 0.62 percent from NT$60.05 billion the previous year.
The company said that while sales at home and in the US and Japan were solid last year, they declined 17 percent year-on-year in China and posted only a mid-single digit percentage growth in Europe due to the euro’s depreciation.
Giant last week gave a conservative outlook for its performance this year, with management forecasting single-digit growth for the US and European markets.
The company said it plans to shift its focus from sales volume to value this year by introducing high-end models to raise its average selling price and spur revenue growth.
However, “we are more conservative due to the elevated base and believe restocking demand would be weaker this year,” CIMB Securities Ltd analyst Jack Lin (林泓彥) said in a note on Sunday.
As Japan’s Shimano Inc, a leading bicycle parts maker that commands 70 percent of the global market for gears, has forecast that its bicycle component sales this year in Europe and China would contract by 16 percent and 11 percent respectively and that sales in the US and Japan would be flat, CIMB believes the overall market would face inventory issues in the first half of the year.
Yuanta Securities Investment Consulting Co (元大投顧) expects Giant’s revenue to increase to NT$62.06 billion this year, but net income could fall to NT$3.8 billion, or NT$10.12 per share.
Giant has proposed distributing cash dividends of NT$6.2 per share, with a payout ratio of 60.5 percent.
Yuanta analyst Peggy Shih (施姵帆) said that is lower than its historical average of 65 to 70 percent.
The cash dividend plan translates into a yield of 3.2 percent, based on Giant’s closing price of NT$193.5 yesterday.
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