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Hon Hai Q2 net profit down over 36% sequentially; rebound expected

2017/08/11 22:21:56

CNA file photo

Taipei, Aug. 11 (CNA) The big drop in second quarter net profit from the previous quarter reported by Hon Hai Precision Industry Co. (鴻海) on Friday was due to a general slowdown in the industry during the April to June period, analysts said.

The second quarter was a product transition period ahead of the launch of new tech gadgets by international brands, and it is typically the slow time of the year for Hon Hai, the world's largest contract electronics maker, the analysts said.

They expected the momentum to reverse in the third quarter and peak in the fourth quarter, after Apple, which has many of its iPhones and iPads assembled by Hon Hai, unveils the next generation iPhones.

In the second quarter, Hon Hai posted a net profit of NT$17.88 billion (US$588 million), down 36.52 percent from a quarter earlier but up 1.1 percent from a year earlier, according to a statement released by the company.

Its earnings per share (EPS) in the second quarter fell to NT$1.03, from NT$1.63 a quarter earlier, Hon Hai said.

Consolidated sales totaled NT$922.41 billion during the three-month period, down 5.4 percent from a quarter earlier but up 0.03 percent from a year earlier.

The company's second-quarter gross margin was 6.81 percent, down 0.55 percentage points from a quarter earlier, but up 0.79 percentage points from a year earlier, while its operating margin was 2.71 percent, down 1.04 percentage points from a quarter earlier but up 0.45 percentage points from a year earlier.

Analysts said the year-on-year increase in the company's gross and operating margins reflected Hon Hai's efforts to improve production efficiency and boost yield rates.

For the first half of this year, Hon Hai's net profit hit NT$46.05 billion, up 1.74 percent from a year earlier, with EPS at NT$2.66.

According to analysts, Apple will launch three new iPhone models later this year, with one of the three to be equipped with an advanced organic light-emitting diode (OLED) screen, a significant upgrade from the existing liquid crystal display.

That phone is likely to spark a wave of replacements among consumers, and because Hon Hai is expected to receive 90-95 percent of the orders for assembly of the OLED iPhones, it should be one of the biggest beneficiaries of the new gadgets, analysts said.

In a recent research note, Taipei-based KGI Securities analyst Kuo Ming-chi (郭明錡) said Hon Hai would convert some of its LCD iPhone production lines in Zhengzhou in China into OLED iPhone production at the beginning of the fourth quarter to meet the expected strong demand.

(By Jackson Chang and Frances Huang)