Hon Hai slides as Apple and Foxconn disappoint

DOUBLE BLOW::While Apple’s revenue guidance was lower-than-expected, Foxconn said it could swing to a loss for last year because of lackluster handset demand

Staff writer, with CNA

Fri, Jan 25, 2013 - Page 14

Shares of Hon Hai Precision Industry Co (鴻海精密), which assembles iPads and iPhones, suffered a double blow yesterday after Apple Inc reported disappointing sales and its Hong Kong-listed handset manufacturing subsidiary issued a profit warning, dealers said.

Investors feared that potential losses by the subsidiary — Foxconn International Holding (富士康控股) — for last year would erode Hon Hai’s bottom line, the dealers said.

Hon Hai owns about 70 percent of Foxconn. Shares of Hon Hai closed down 2.94 percent at NT$82.50 yesterday, underperforming the benchmark index, which ended down 0.62 percent at 7,695.99 points.

Hon Hai shares opened lower after Apple on Wednesday provided a lower-than-expected sales guidance for the current quarter. Selling intensified on reports that Foxconn had warned that it might post a loss for last year, compared with a net profit of US$72.80 million in 2011.

In a statement filed with the Hong Kong stock exchange on Wednesday, Foxconn said that it expected to post a full-year consolidated loss, largely due to weak demand from some of its clients.

Foxconn makes cellphones for international brands such as Nokia, Research in Motion and Motorola, as well as for major Chinese vendors such as Huawei Technologies Co (華為) and ZTE Corp (中興).

Analysts said that Foxconn’s international brand customers had lost market share to Apple and South Korea’s Samsung.

Foxconn said unfavorable pricing changes, cost increases and charges on some of its assets also contributed to the decline in its gross margin.

In the first half of last year, Foxconn incurred a consolidated net loss of US$226 million. However, the contract handset maker said it expected losses in the second half of the year to be smaller than in the first half due to continuous efforts to enhance its operating efficiency, cost rationalization, resource optimization and asset disposal.