Hon Hai Precision Industry Co (鴻海精密) felt the squeeze from last year’s delayed launch of Apple Inc’s iPhone X, the latest results from the world’s largest electronics contract manufacturer show.
Were it not for a one-time gain of US$2.2 billion from the sale of Sharp shares, it would have been the company’s worst holiday quarter since 2010, analysts said.
Hon Hai on Friday last week reported net income of NT$71.7 billion (US$2.5 billion) in the three months that ended on December last year, based on calculations using previously reported earnings. That exceeded the NT$58 billion average estimate of analysts. Fourth-quarter revenue reached an all-time high of NT$1.73 trillion. Earnings per share (EPS) were NT$4.14.
Analysts point to Hon Hai’s December sale of ￥352.5 billion (US$3.32 billion) of Sharp shares to ES Platform LP, a partnership formed by company employees, as the main reason for the iPhone maker’s better-than-expected results.
“The main profit gains came from the non-operating end. Hon Hai disposed of Sharp’s special shares in the same period, recognizing up to NT$66 billion,” Fubon Securities Co (富邦證券) analyst Arthur Liao (廖顯毅) said in a note. “Without this, EPS in the quarter would only be around NT$1.44.”
EPS would have been about NT$1.28 without the gain from the Sharp sale, Vincent Chen (陳豊丰), regional head of research at Yuanta Securities Investment Consulting Co (元大投顧), said in a note.
Based on the analysts’ calculations, Hon Hai’s fourth-quarter net income would have been less than NT$25 billion without the sale of Sharp shares. That would have been the company’s lowest fourth-quarter figure in seven years.
Bloomberg calculated that operating profit was NT$32.4 billion. The gross margin and the operating profit margin missed estimates.
Hon Hai shares fell 3.17 percent to close at NT$88.50 on Saturday, with 136.29 million shares changing hands, while the TAIEX ended up 0.12 percent at 10,919.49 points.
Full-year net income was NT$138.7 billion, falling for the first time since 2008, as profits took a hit in the second half of last year, partly on delayed iPhone X shipments.
Despite reports of lackluster demand for the device, Apple chief executive officer Tim Cook said on an earnings call in February that the iPhone X was the best-selling smartphone over the holidays, citing research firm Canalys.
Hon Hai is the sole maker of Apple’s priciest gadget.
The company gets more than half of its revenue from Apple, but chairman Terry Gou (郭台銘) is looking for ways to expand beyond merely assembling gadgets — especially as the smartphone market sputters.
He is taking Foxconn Industrial Internet Co (FII, 富士康工業互聯網), a subsidiary focused on cloud services and “smart” manufacturing, public in China.
In a March 13 note, Liao estimated FII’s market value could hit 269 billion yuan (US$42.79 billion) compared with Hon Hai’s US$56 billion.
Hon Hai does not provide revenue breakdowns, forecasts or hold investor conferences.
A Foxconn spokesman did not provide details on the sale of Sharp shares.
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