Contract electronics maker Compal Electronics Inc (仁寶) yesterday reported a sequential fall in earnings for the final quarter of last year, which also missed analysts’ expectations, due to slowing PC shipments, limited sales contribution from servers and 5G applications, and higher operating expenses.
The company said that seasonal factors and business strategy adjustments dragged sales in the October-to-December quarter, which fell 6.21 percent to NT$229.16 billion (US$6.98 billion) from NT$244.32 billion the previous quarter.
However, efforts to optimize its product mix mitigated some of the impact, lifting gross margin to 5.04 percent from 5.01 percent, Compal said in a statement.
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Operating profit declined 30.17 percent to NT$3.27 billion from NT$4.58 billion the prior quarter due to higher operating expenses, while net profit also decreased 41.93 percent to NT$1.94 billion from NT$3.33 billion, which was also lower than the NT$3.04 billion analysts at Yuanta Securities Investment Consulting Co (元大投顧) had expected.
For the full year, operating profit rose 23.19 percent to NT$14.84 billion from NT$12.05 billion, and net profit increased 30.96 percent to NT$10.04 billion from NT$7.67 billion, despite a 3.85 percent decrease in revenue to NT$910.25 billion from NT$946.72 billion.
Earnings per share were NT$2.3 last year, up from NT$1.76 the previous year, the company said.
Compal’s board of directors approved a proposal to distribute a cash dividend of NT$1.4 per share, the highest in three years and suggesting a payout ratio of 60.87 percent.
This year, the company would continue its business transformation and strengthen non-PC businesses, such as artificial intelligence (AI) PCs, servers and automotive electronics, Compal president Anthony Peter Bonadero told an earnings conference in Taipei.
PC revenue contributed 75 percent of the company’s total revenue last year, while non-PC revenue — generated from products including mobile devices, tablets, servers, automotive electronics, 5G applications, and medical and industrial products — accounting for the remaining 25 percent, company data showed.
Compal said its PC business growth would be consistent with the industry trend, adding that the global PC industry is expected to grow by a mid-to-high single-digit percentage this year, driven by the upgrade of commercial PCs, the increasing popularity of AI computers, rising demand for gaming PCs and Chromebook replacement demand.
The company expects its server sales to grow by a double-digit percentage this year.
Compal said it is working in cooperation with Nvidia Corp and Advanced Micro Devices Inc, focusing on AI training and inference servers, while also investing in the development of liquid cooling technology and server cabinet solutions.
The company expects its automotive electronics business to show steady growth this year after gaining orders from multiple tier-1 customers and to post sustainable growth in the next few years.
Compal plans to increase capital expenditure to NT$10 billion this year from NT$7 billion last year, while expanding non-China production capacity, Bonadero said.
In the wake of tariff and geopolitical concerns, the company plans to increase production outside of China and continue to expand its factories in Vietnam and other areas, he said.
The company is also working with a third party to evaluate the feasibility of setting up a server factory in the US, but is still evaluating potential sites, he added.
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