Telecom equipment maker Sercomm Corp (中磊) yesterday reported a 27.8 percent annual growth in net profit for last year, benefiting from growing demand for higher-margin products such as surveillance equipment and Wi-Fi upgrades by enterprises.
Net profit jumped to NT$1.03 billion (US$34.02 million), compared with NT$808 million in 2018. That translated into earnings per share of NT$4.21, up from NT$3.32 in 2018, while gross margin climbed from 13.4 percent to 16 percent, the company said.
However, revenue slid 4.8 percent year-on-year from NT$33.39 billion to NT$31.8 billion, down for a second consecutive year.
This year, revenue is to return to growth, fueled by rising demand for fiber broadband deployment and upgrades in emerging markets, such as India and Indonesia, and European countries, Sercomm said.
However, the COVID-19 pandemic could limit the growth, it said.
“We had an aggressive [target] for 2020 top-line growth, which should have been significant. Now, due to the pandemic, we still believe Sercomm will grow [revenue] this year,” company president James Wang (王煒) told an investors’ conference.
The global economy is facing strong headwinds from the spread of COVID-19, but the coronavirus is stimulating demand for home broadband upgrades, as a growing number of people are asked to work from home due to virus-driven lockdowns, Wang said.
Companies are raising Internet speeds at home for employees to ensure stable connections between homes and offices, he said.
As companies turn to video conferencing to avoid in-person meetings, faster and additional bandwidth would be required, he added.
“This will have a positive effect on Sercomm,” Wang said. “Raising broadband speeds will be an important element buoying the company’s revenue amid virus-induced uncertainty.”
As Malaysia and the Philippines announcing lockdowns following in the steps of European countries, Sercomm expects the effects to be limited, as the containment mainly focuses on public gatherings and retail closures, Wang said.
No large-scale factory shutdown is expected, he said.
“One month ago, supply-side disruption was a grave concern for us. Today, demand-side disruption is of greater concern,” Wang said.
Sercomm last year set up a factory in the Philippines as part of the company’s efforts to move capacity out of China amid a US-China trade dispute.
A factory in Suzhou, China, constitutes about 55 percent of the company’s total manufacturing capacity, Sercomm said.
As the virus is apparently under control in China, Sercomm said that it has fully resumed production there.
The company’s board of directors yesterday proposed a cash dividend distribution of NT$3 per common share, representing a payout ratio of approximately 71 percent.
The board also approved a share buyback program, which aims to repurchase 5 million shares at between NT$42.91 and NT$109.15 during the two-month period to May 18, the company said.
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