FIH Mobile Ltd (富智康), a subsidiary of Hon Hai Precision Industry Co (鴻海精密), has issued a profit warning, saying that net losses in the first half of this year could be greater than from the same period last year.
FIH, which is about 70 percent owned by Hon Hai, said its net losses in the first quarter of this year could reach US$126 million due to foreign-exchange losses of US$26.6 million incurred during the period.
Under such unfavorable circumstances, its net losses in the first half could exceed the US$199 million incurred a year earlier, the company said.
In the first quarter of last year, FIH, which is listed on the Hong Kong stock exchange, saw foreign-exchange gains of about US$6.7 million.
The company said its sales in the first quarter could reach US$3.19 billion.
FIH is a contract cellphone manufacturer that has a broad production base in China and clients that reportedly include major Chinese smartphone brands such as Xiaomi Corp (小米), Oppo Mobile Technologies Corp (歐珀移動), Huawei Technologies Co (華為) and ZTE Corp (中興).
In the second half of last year, FIH recorded a depressed gross margin and net losses of US$326.32 million, issues that have extended into this year, it said.
In addition, increasing operating costs in its integration, innovation, design and manufacture business are expected to further squeeze its bottom line this year, FIH added.
Market analysts have said that the profitability of Hon Hai is likely to be affected by the problems at FIH.
However, investors in Taiwan ignored the profit warning yesterday as Hon Hai shares continued to climb from the previous session, in line with the broader market, on bargain hunting.
Hon Hai, one of the top large-cap stocks in Taiwan, closed up 1.23 percent at NT$82.60 on the Taiwan Stock Exchange, while the TAIEX ended up 0.82 percent.
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