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Hon Hai's Q1 gross profit margin falls below 7% (update)

2012/05/14 23:28:40

Taipei, May 14 (CNA) Taiwan's Hon Hai Precision Industry Co., the world's largest contract electronics maker, reported a quarterly gross profit margin below 7 percent for the first time in the company's history Monday.

The company's gross margin in the first quarter was 6.64 percent, down from 8.89 percent the previous quarter, according to a statement Hon Hai released Monday night.

Its operating margin also fell to 1.52 percent in the quarter, down from 3.29 percent a quarter earlier.

The decline in margins reflected sequential declines in consolidated revenues and gross profit posted by the company, which manufactures iPhones and iPads for Apple Inc.

Consolidated revenues for the quarter were NT$1.00 trillion (US$33.88 billion), down 6.5 percent from fourth quarter revenues of NT$1.07 trillion, and first-quarter gross profit fell 30.3 percent quarter-on-quarter to NT$66.53 billion, lower than the NT$95.48 billion reported a quarter earlier.

But both consolidated revenues and gross profit were higher year-on-year, up 37.3 percent and 25.91 percent from the first quarter in 2011.

Net income totaled NT$14.92 billion, plummeting 57.4 percent from the NT$35.03 billion reported the previous quarter but up 3.62 percent year-on-year.

In late April, when it unveiled unconsolidated revenue, Hon Hai reported lower-than-expected earnings per share of NT$1.4 (US$0.047) for the first quarter, down nearly 56 percent from the NT$3.18 in EPS it posted in the previous quarter.

At the time, the company attributed the decline to rising labor costs at its plants in China and a slowdown typically seen in the first quarter, the industry's traditional low season.

Hon Hai shares closed up 0.58 percent at NT$86.9 in Taipei Monday before the results were announced.

Known as the Foxconn Technology Group in China, Hon Hai broke ground on its China headquarters in Shanghai on May 10, where the group expects to set up an operating hub and cutting-edge research and development center.

Hon Hai Chairman Terry Gou believes the new facility will help transform Hon Hai from a "manufacturing technology" company into a "business and e-commerce orientated" company.

(By Jeffrey Wu and James Lee)