Hon Hai shares hit by 2017 results

Taipei, Shares of Taiwan-based manufacturing giant Hon Hai Precision Industry Co. took a beating Saturday after the company reported disappointing earnings for 2017 a day earlier, dealers said.

Hon Hai, the major assembler of iPhones, posted an increase in net profit in the fourth quarter of last year but the growth resulted largely from earnings from its non-core business operations, indicating lower-than-expected global demand for the premium iPhone X, they said.

Shares of Hon Hai fell 3.17 percent to close at NT$88.50 (US$3.04), with 136.29 million shares changing hands, while the weighted index on the Taiwan Stock Exchange ended up 0.12 percent at 10,919.49 points.

The stock encountered downward pressure soon after the local equity market opened as investors took cues from Hon Hai's 2017 earnings report, which showed NT$138.73 billion in net profit, down 6.68 percent from a year earlier.

The company's 2017 earnings showed a decline despite a 240.76 percent quarterly increase in net profit in the fourth quarter of last year to NT$71.66 billion, which also represented a 4.2 percent year-on-year hike.

"The net profit growth for the fourth quarter resulted largely from Hon Hai's disposal of preferred stocks issued by Sharp Corp.," KGI Securities analyst Phil Chu said. "Otherwise, the fourth quarter results would have been ugly due to weaker-than-expected demand for the iPhone X."

Hon Hai is believed to be the sole assembler of the high end iPhone X, which Apple Inc. released on its 10th anniversary.

According to Hon Hai, the proceeds from the disposal of Sharp's preferred stocks totaled NT$66 billion, which was all booked in the fourth quarter of 2017, but the company also recorded about NT$11.7 billion in foreign exchange losses that quarter.

In 2017, Hon Hai's earnings per share stood at NT$8.01, down from NT$8.6 in 2016, while its gross margin fell to 6.4 percent from 7.3 percent from a year earlier.

The company reported an operating margin, of 2.3 percent, down from 4 percent the previous year, and a net margin of 2.8 percent compared with 4.5 percent in 2016.

"Judging from the downturn of Hon Hai, I suspect foreign institutional investors stood on the sell side today, although many investors were away for the weekend," Chu said. "It is worth watching whether the selling of Hon Hai shares will continue when foreign investors return to the local market after the weekend."

Taiwan was the only equity market opened on Saturday, which was a regular workday to make up for an additional holiday during the Tomb Sweeping Festival next week.

Source: Focus Taiwan News Channel