Fri, Mar 16, 2018 - Page 12 News List

Pegatron Q4 profit slumps 40%

STRATEGY:The company this year will focus on responding quickly to changing market dynamics and improving its components subsidiaries’ profitability, an executive said

By Lauly Li  /  Staff reporter

Pegatron Corp (和碩), Apple Inc’s second-largest iPhone assembler, yesterday reported a nearly 40 percent annual drop in net income for last quarter, dragged down by weak iPhone sales and declining contributions from its components subsidiaries.

Net profit last quarter was NT$3.72 billion (US$127.4 million), compared with NT$5.86 billion a year ago, marking the company’s lowest record over the corresponding period in the past five years, company data showed.

“The ramp-up of a major communication product started later than planned and the peak season for the product ended earlier than expected. Pegatron’s expanded production only ran on full capacity for one or two months,” chief financial officer Charles Lin (林秋炭) told a teleconference.

A low utilization rate, surging costs on idle personnel and capacity expansion expenses affected Pegatron’s margin performance last quarter, Lin said.

Gross margin fell 1.55 percentage points annually to 3.2 percent during the October-to-December quarter, the lowest since the fourth quarter of 2012. Operating margin shrank 1.3 percentage points to 1.2 percent, the weakest since the third quarter in 2013.

The sluggish earnings performance of component subsidiaries, such as Casetek Holding Ltd (鎧勝) and Kinsus Interconnect Technology Corp (景碩), also weighed on Pegatron’s margins, Lin said.

“The impact from the components subsidiaries accounted for between 30 and 40 percent of Pegatron’s margin decline last quarter,” Lin said.

Pegatron this year will focus on responding quickly to rapid changes in the market and improving its subsidiaries’ profitability, he said.

Pegatron chief executive officer S.J. Liao (廖賜政) said that management remains optimistic about the firm’s communication business this year, as its main smartphone client is estimated to add new functions for its new product.

“We think the new functions and applications will stimulate demand for the device,” Liao said.

Pegatron’s consumer electronics segment, which contributed 13 percent to its revenue of NT$377.56 billion last quarter, is estimated to see better performance this year, supported by growing orders for game-related products and “smart” home devices, Liao said.

The company is prepared to spend between US$350 million and US$400 million in capital expenditure this year, with more than US$200 million of that focusing on production expansion for communication and consumer electronics products, Lin said.

The company’s net income plunged 24.05 percent annually to NT$14.68 billion last year, or NT$5.66 per share.

Pegatron’s board also approved a proposal to distribute a cash dividend of NT$4 per share.

That translates into a payout ratio of 70.67 percent, higher than the previous year’s 66.66 percent, and a yield of 5.26 percent based on its closing price of NT$76 yesterday.

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