Hon Hai Precision Industry Co (鴻海精密), a major iPhone assembler, yesterday reported annual growth of 72 percent in net profit last quarter, due to a dramatic decrease in losses from Sharp Corp’s display business.
Net profit surged to NT$22 billion (US$678.7 million) last quarter, from NT$12.83 billion a year earlier, as Hon Hai booked a non-operating loss of NT$4.24 billion, an improvement from NT$20.12 billion in the first quarter of last year. A major portion of its non-operating loss came from Sharp’s large flat-screen business Sakai Display Products Corp.
On a quarterly basis, Hon Hai’s net profit sank 59 percent from NT$53.15 billion.
Photo: Ritchie B. Tongo, EPA-EFE
Its earnings per share expanded to NT$1.59 last quarter from NT$0.93 percent a year earlier — a decline from NT$3.83 in the previous quarter.
Gross margin last quarter rose to 6.32 percent, from 6.04 percent a year earlier and 6.12 percent a quarter earlier, while operating margin improved to 2.78 percent from 2.77 percent in the first quarter of last year and 2.64 percent in the fourth quarter.
“The worst is behind Sharp. Its future only gets better from here,” Hon Hai chairman Young Liu (劉揚偉) said in a statement.
Sharp’s Sakai flat-panel factory, which is of most concern to investors, would be transformed into an artificial intelligence (AI) data center as the Japanese firm aims to become asset light, Liu said.
Hon Hai is the biggest shareholder of Sharp, owning a stake of about 34 percent, together with its investment arm Foxconn (Far East) Ltd.
Going forward, Hon Hai expects revenue this quarter to grow significantly on a quarterly and an annual basis, despite slow seasonality.
The growth would outpace the company’s three-year average, driven by robust demand for AI servers as reflected by an aggressive capital spending increase of 20 percent by the world’s major cloud service providers (CSPs), Hon Hai spokesman James Wu (巫俊毅) told investors yesterday.
Revenue in the second quarter expanded more than 6 percent annually on average from 2021 to last year, Hon Hai’s financial statements showed.
Smart consumer electronics products, mainly smartphones, was the only segment that did not report growth.
“CSP companies show strong server procurement activities with a focus on AI servers. They also started buying general-purpose servers again,” Wu said.
Hon Hai reported a 200 percent annual increase in AI server revenue for the January-to-March period, Wu said.
That growth momentum would continue for the rest of this year, he said, adding that demand for general-purpose servers has also picked up.
The company plans to produce AI servers powered by Nvidia Corp’s new Blackwell graphics processing unit platform in the second half of this year, Wu said.
Regarding the company’s full-year business outlook, visibility has improved from three months ago due to robust AI server demand, Hon Hai said.
However, it retained its forecast that this year’s revenue would increase “significantly” from last year’s NT$6.16 trillion, the second-highest in the company’s history.
Prospects for the information communications technology segment remain flat this year, Wu said.
Hon Hai said it has made progress selling its electric vehicles (EVs) overseas and expects to ship its first batch of its EVs next year.
The company said it also expects to sign supply agreements with two Japanese automakers in the second half of this year, making Japan the most important market for Hon Hai.
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