Battery pack manufacturer Simplo Technology Co (新普科技) yesterday announced plans to cut its capitalization by 40 percent to adjust its capital structure and return NT$4 in cash per share to stockholders.
The plan, which will see the company’s capitalization drop from NT$1.23 billion (US$40.62 million) to NT$1.84 billion, will be the first such reduction in the company’s history, according to a corporate news release.
“Unlike companies that reduce their capital due to poor performances, Simplo is doing it because it has too much cash on hand,” chairman and chief executive officer Raymond Sung (宋福祥) told an investors’ conference in Taipei.
Simplo, which supplies battery packs for Apple Inc’s iPhones and MacBooks, will still have more than NT$14 billion in cash and cash equivalents after the reduction, which Sung said it plans to utilize in seeking merger and acquisition (M&A) opportunities in non-information technology (IT) industries, such as medical equipment manufacturing.
The company also plans to continue investing in industrial automation equipment and robot arms for its 12 manufacturing facilities in Taiwan and China to cut labor costs and improve production efficiency, he said.
Sung said that he expects the company’s performance this year to be flattish or slightly better than last year’s NT$58.12 billion in revenues, as the smartphone industry faces intensified competition, while the tablet industry continues to shrink.
Contribution to overall sales from non-IT businesses, which include supplying battery packs for electric bicycles in Europe and Japan, is expected to increase from 6 percent last year, Sung said, adding that he hopes the ratio reaches 10 percent next year.
Revenue this quarter is estimated to plunge by between 29.3 percent and 31.72 percent to between NT$11.3 billion and NT$11.7 billion from last quarter’s NT$16.55 billion due to seasonal factors.
Gross margin is forecast to decline to an average of 8.5 percent this quarter from last quarter’s 10.01 percent on the sharp appreciation of the New Taiwan dollar against the greenback, Sung said.
As exports account for 70 percent of Taiwan’s GDP, Sung said he hoped the central bank would intervene to prevent the New Taiwan dollar from appreciating further.
“The current trend of the NT dollar is adverse to export-oriented companies because it erodes companies’ profitability,” he said.
Sung’s remarks came after Simplo reported a net income of NT$2.8 billion, or earnings per share of NT$9.09, for last year, which contracted 9.96 percent from NT$3.11 billion, or NT$10.1 per share, for 2015.
Simplo’s board yesterday approved spending NT$1.84 billion to distribute cash dividends of NT$6 per common share, based on earnings of NT$9.09 per share last year.
That represents a payout ratio of 66 percent and a yield of 5.63 percent, based on its closing price of NT$106.5 on the local bourse yesterday.
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