Hon Hai 2016 net profit hits new high

Taipei--Taiwan-based Hon Hai Precision Industry Co. (??), an assembler of iPhones and iPads for Apple Inc., posted a record high in net profit for 2016, with market analysts attributing the growth to the launch of the latest iPhones.

In the 2016 financial results, Hon Hai also witnessed its gross margin, operating margin and net profit improve from a year earlier, although the company reported the first year-on-year decline in revenue last year since it launched a listing on the Taiwan Stock Exchange in June 1991.

In a statement, the world's largest contract electronics maker said that its net profit totaled NT$148.66 (US$4.91 billion), up 1.22 percent from a year earlier, with earnings per share at NT$8.60, compared with NT$8.54 in EPS recorded in 2015.

At the same time, Hon Hai recorded NT$4.36 trillion in consolidated sales for 2016, down 2.75 percent from a year earlier, marking the first sales fall for the company. Terry Gou (???), chairman of Hon Hai, apologized for the sales drop in the company's year-end dinner held in January.

But the new iPhones -- the 5.5-inch iPhone 7 Plus and the 4.7-inch iPhone 7 -- which went on global sales in September helped Hon Hai command a higher profit margin, while the company raked in foreign exchange gains due to a weaker Taiwan dollar in the fourth quarter, giving an additional boost to the manufacturer's bottom line, analysts said.

Meanwhile, Sharp Corp, in which Hon Hai owns a 66 percent stake after a US$3.5 billion acquisition deal was completed in August 2016, turned a profit during the October-December period, the first quarterly profit after losses for nine consecutive quarters. That also helped the Taiwanese parent strengthen its profitability, analysts added.

In 2016, Hon Hai's gross margin, the difference between revenue and cost of goods sold, grew to 7.38 percent from 7.15 percent seen a year earlier, while its operating margin, the difference between sales and both the cost of goods sold as well as operating expenses, rose to 4.01 percent from 3.66 percent.

Hon Hai's net margin, the difference between its gross profit and its total expenses, including interest payments and taxes, also rose to 3.41 percent in 2016 from 3.28 percent a year earlier.

In the fourth quarter alone, Hon Hai said, its net profit hit NT$68.77 billion, up 98.54 percent from a quarter earlier and also up 29.90 percent from a year earlier. That strong performance was attributed to the debut of the new iPhones, which served as an engine for growth for the entire 2016. The fourth quarter net profit was also a record high for Hon Hai.

Its EPS for the October-December period stood at NT$3.98, compared with NT$2 seen in the third quarter and NT$3.39 recorded over the same period of last year, Hon Hai said.

Analysts said that the market has high hopes about Hon Hai's bottom line for 2017 since the iPhone will enter its 10th anniversary and the next models are expected to have a significant upgrade, which will spark waves of replacements and boost global buying.

Apple accounts for more than 40 percent of Hon Hai's total sales.

Source: Focus Taiwan News Channel