Hon Hai Precision Industry Co (鴻海精密), Apple Inc’s leading iPhone assembler, yesterday reported that first-quarter net profit plunged 89.49 percent from a year earlier to NT$2.08 billion (US$69.45 million) amid the fallout from the COVID-19 pandemic.
This translated into earnings per share of NT$0.15, its lowest quarterly figure since the financial crisis of 2008.
Blaming dwindling market demand as well as production disruptions in China, which accounts for about 70 percent of its operations, Hon Hai posted heavy operating expenses of NT$37.29 billion, including NT$10 billion in epidemic prevention costs.
Photo: Tyrone Siu, Reuters
Gross margin slid to 4.5 percent last quarter from 5.53 percent in the same period last year. Operating margin dipped to 0.49 percent from 1.53 percent a year earlier.
Revenue fell 12 percent year-on-year to NT$929.13 billion.
A shipment breakdown showed that consumer products made up 42.1 percent of total sales, enterprise products 27.4 percent, computing products 23.7 percent and components the remainder.
With the global economic outlook turning dim because of the pandemic and dampening smartphone demand, Hon Hai forecast a single-digit annual decline in sales for this quarter, including a 15 percent annual drop for its consumer products segment.
“We are, however, seeing a rise in demand for our other segments, as consumers adopt a new lifestyle as they [increasingly] work from home,” Hon Hai chairman Young Liu (劉揚偉) told investors during a teleconference.
The company’s enterprise products and components segments are each expected to post a 10 percent annual increase in sales this quarter, while computing products sales are forecast to grow by 15 percent.
Second-quarter gross margin is likely to return to previous levels, Liu added, while reaffirming Hon Hai’s goal to raise gross margin to 10 percent by 2025.
While Hon Hai’s production plants across China are up and running, its India plants are to remain closed until Sunday because of a govenrment-imposed lockdown, Liu said, adding that operations in Mexico are likewise suspended due to regulations.
Asked about potential relocation plans, following reports that Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is building a plant in the US, Liu said it would first and foremost be based on clients’ wishes.
“We have no specific requests from our customers for now... It is very unlikely that we would move our manufacturing facilities to the US as they labor-intensive,” Liu said, pointing to the heavy costs that would weigh on Hon Hai’s profitability in that scenario.
Furthermore, Liu said that the company would transform 10 percent of its facilities into “lighthouse” factories by the end of the year.
Based on digital transformation, Hon Hai is aiming to improve its bottom line by cutting down 30 to 50 percent of its factory workforce, he said.
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