Advantech Co (研華), the world’s largest maker of industrial computers, yesterday said it plans to raise prices later this year to improve gross margin, which dropped below 40 percent last quarter due to rising component costs and unfavorable foreign-exchange rates.
Gross margin fell to 38.6 percent, compared with 41.68 percent a year earlier and 40.5 percent in the first quarter.
“Prices for some key components, including hard drives and flash [memory chips], have been on the rise since the fourth quarter last year, but we could not pass the cost increase on to clients [immediately],” company spokesperson Jill Su (蘇智蘋) told a teleconference, citing long-term contracts with customers.
“We are considering hiking prices for new products and commodity products,” Su said. “The effect of price increases [on revenue] will become evident in September.”
The company is also considering further increasing prices at negotiations for new contracts with clients at end of this year, she said.
Gross margin for the whole of this year is to return to 40 percent, which Advantech has averaged over the past few years, Su said.
Advantech’s net profit last quarter rose 18 percent to NT$1.72 billion (US$56.76 million), compared with NT$1.46 billion in the same quarter last year. Earnings per share increased from NT$2.09 to NT$2.47 in the same period.
On a quarterly basis, net profit rose 42 percent from NT$1.21 billion, thanks to foreign-exchange rates and gains from the disposal of assets.
Nonoperating income rose to NT$386.44 million last quarter, compared with NT$150.16 million a year earlier and a loss of NT$4.38 million a quarter earlier.
Revenue inched up 3.7 percent from NT$10 billion in the first quarter to NT$11.41 billion last quarter due to sluggish demand in North America, the firm’s biggest revenue contributor.
Advantech’s customers in North America are mostly telecoms, which have been experiencing business setbacks since 2015, Su said.
Those customers are to see a recovery in the second half as long-term product revamps bear fruit, she said.
A 10 percent year-over-year growth target for the whole of this year is achievable, Su said.
Growth will primarily be backed by robust demand for industrial automation and embedded boards for industrial computing devices in China and Europe, Su said.
In the first half, Advantech’s revenue grew by 3.8 percent annually from NT$20.19 billion to NT$30.96 billion.
The company said it has no plan to invest large amounts on building new plants in the US or elsewhere before 2020.
It has built sufficient capacity at a new plant in New Taipei City, it said.
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