Fri, Nov 10, 2017 - Page 11 News List

Pegatron net profit drops on labor costs, shortages

By Lauly Li  /  Staff reporter

Pegatron Corp (和碩), one of Apple Inc’s iPhone assemblers, yesterday unexpectedly reported a 32.4 percent annual decline in net profit for last quarter to NT$3.63 billion (US$120.28 million), citing surging labor costs and component shortages for communications products.

The initial expense to expand production capacity at its plants in China also weighed on profitability, the company said.

Earnings per share were NT$1.4 last quarter, which missed the market consensus estimate of NT$2.2.

Gross margin dropped 1.38 percentage points year-on-year to 3.4 percent last quarter, its lowest since the fourth quarter of 2012, while operating margin contracted 1.17 percentage points annually to 1.3 percent, the lowest since the third quarter of 2013.

“Recruitment costs in China were higher this year than in the past few years, as a labor shortage and rising wage issues are serious,” Pegatron chief financial officer Charles Lin (林秋炭) told a teleconference.

The firm began recruitment earlier than usual to prepare personnel for the peak season, but a disruption to the supply of components caused idle staff when Pegatron was scheduled to ramp up production of a new communications product, Lin said.

Revenue last quarter totaled NT$336.86 billion, with the communications segment contributing 65 percent of the total. The segment mainly refers to the smartphone assembly business, which includes iPhones.

While the component and labor shortage problems are expected to ease slightly this quarter, their effects on the company’s gross margin would remain, Lin said.

Notebook computer shipments are estimated to climb by between 15 percent and 20 percent from last quarter, but motherboard and desktop computer shipments are forecast to fall by between 20 percent and 25 percent quarterly, he said.

Revenue from the communications segment is forecast to improve from last quarter on the back of strong sales amid peak season, Lin said, without elaborating.

Overall, revenue this quarter is expected to outpace last quarter’s and reach this year’s peak, he said.

However, business performance might be weaker next quarter, due to limited order visibility and the beginning of the slow season for consumer electronics, he added.

In the first 10 months of this year, combined revenue increased 3.63 percent from the same period last year to NT$982.8 billion, company data showed.

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