Hon Hai unit warns of major losses for 2018
Taipei, Feb. 25 (CNA) FIH Mobile Ltd., a Hong Kong-listed subsidiary of Taiwan-based manufacturing giant Hon Hai Precision Industry Co., has issued a profit warning, indicating it will report major losses for 2018.
In the profit warning, FIH Mobile, in which Hon Hai owns a 62.8 percent stake, said it is likely to report US$870 million or about NT$26.7 billion in consolidated net loss for 2018, on top of a net loss of US$525 million in 2017.
Market analysts said the heavy losses suffered by FIH Mobile could have an adverse impact on Hon Hai's bottom line for 2018.
Hon Hai has not yet released its 2018 results, but analysts said the loss incurred by FIH Mobile could cut the earnings of the parent company by about NT$16.8 billion for 2018.
In the first nine months of last year, FIH, which rolls out products for non-Apple Inc. brands such as Xiaomi, OPPO and Huawei Technologies, posted a net loss of US$575 million, though its sales grew 25.4 percent from a year earlier during the same period to US$10.34 billion.
For 2018, FIH Mobile estimates its revenue will grow 22.5 percent from a year earlier to top US$14.8 billion, despite the large losses, the Hon Hai subsidiary said in the profit warning.
The deteriorating bottom line came partly because FIH Mobile suffered an increase in foreign exchange-related losses, which are expected to hit about US$120 million in 2018, compared with a gain of US$19.51 million the previous year, the subsidiary said.
FIH Mobile said it also suffered losses resulting from investments in listed companies that could reach US$71 million in 2018.
In addition, FIH Mobile could report US$79.5 million in goodwill losses for the year, while it is expected to take a substantial impairment loss resulting from its interest in a material associate, with losses up to US$78 million.
FIH Mobile added that it expects to report a fair value loss of up to US$44.80 million in the company's convertible notes. The fair value loss FIH Mobile faces extended from late 2017 into 2018 and is likely to continue into 2019, according to the profit warning.
Looking ahead, FIH Mobile said operating expenses could be reduced in 2019 so downward pressure on its gross margin, which reflects the difference between revenue and cost of goods sold, is expected to ease.
FIH Mobile generates about 81 percent of its sales from the company's top five customers.
In November 2016, FIH Mobile acquired feature phone assets from Microsoft Mobile Oy. In December 2016, FIH Mobile signed an agreement with Nokia Technologies Ltd. and HMD Global Oy on cell phone and tablet computer development under the Nokia brand.
Last year, a unit of FIH Mobile spent about US$62 million to acquire preferred shares in HMD to upgrade its cell phone development capability.
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