Advantech Co (研華) yesterday posted annual growth in net profit of 8.9 percent for last quarter, a lackluster result due to an unfavorable product mix and the strength of the New Taiwan dollar hurting its gross margin.
The world’s biggest industrial computer maker said it expects an unfavorable foreign exchange rate to continue to affect revenue for the whole of the year, and as a result, it expects revenue to expand at a just 5 or 6 percent on an annual basis this year, compared with its forecast of a 10 percent growth rate.
“The foreign exchange rate is an issue faced by almost all industrial computer makers this year plus [weaker] product mix and rising raw material costs. It is very challenging to keep our track record,” Jill Su (蘇智蘋) told a teleconference.
Gross margin slid to 39 percent last quarter, compared with 41.5 percent in the previous year, but up from 38.6 percent in the second quarter.
Advantech attributed the gross margin contraction to robust demand for lower-margin embedded board modules last quarter.
Embedded board modules, which enjoyed the fastest year-over-year growth rate of its product lines, delivered less than 40 percent gross margin, it said.
“We believe the second quarter figure is the trough,” Su said. “The long-term goal is to maintain gross margin at 40 percent.”
Net profit increased to NT$1.59 billion (US$52.7 million) during the quarter ending on Sept. 30, compared with NT$1.47 billion in the same period last year. That translated into earnings per share of NT$2.29 a share, up from NT$2.1.
Demand from Europe and Greater China were quite strong last quarter, while the US market was recovering, the company said.
As for the impact from the exodus in September of 10 senior executives from its contract industrial computer group, Su said that the situation was under control.
Revenue from the business group accounted for 9 percent of Advantech’s total revenue.
Business momentum could weaken in the current quarter after a 20 percent quarterly decline last quarter, due to less vigorous booking, Su said.
Advnatech said it did not rule out the possibility of boosting its holdings in Winmate Inc (融程電訊). It hold 16 percent of the company after investing NT$540 million.
“We believe the companies can create synergy,” Su said.
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