Hon Hai shares under pressure on Q2 results

Taipei, Shares of iPhone assembler Hon Hai Precision Industry Co. came under pressure Tuesday after reporting a decline in second quarter net profit, dealers said.

While the broader market staged a technical rebound from a 2.14 percent slump a day earlier, Hon Hai shares fell further to below the NT$82 (US$2.66) mark to limit the market's upturn, they said.

As of 10:52 a.m., shares of Hon Hai had fallen 3.10 percent to NT$81.20, with 50.87 million shares changing hands on the Taiwan Stock Exchange, where the weighted index was up 0.24 percent at 10,775.11. On Monday, Hon Hai shares shed 2.44 percent.

"Investors simply seized on the latest earnings report to dump the stock," Masterlink Securities analyst Tom Tang said.

"The earnings report dealt another blow to the stock today after it fell below the 20-day moving average of NT$85 yesterday (caused by a freefall in the Turkish currency)."

In a statement released on Monday, Hon Hai, the world's largest contract electronics maker, said its net profit for the second quarter fell 27.3 percent from a quarter earlier and was also down 2.18 percent from a year earlier to NT$17.49 billion.

Earnings per share for the April-June period fell to NT$1.01 for the quarter, down from NT$1.39 in the first quarter and NT$1.03 in the second quarter of 2017, Hon Hai said.

"In addition to slow season effects, the fall in earnings also reflected Hon Hai's increased spending on research into new products and development of new technologies such as artificial intelligence," Tang said.

As a result, Hon Hai's gross margin -- which reflects the difference between revenue and cost of goods sold -- fell to 5.63 percent in the second quarter from 6.19 percent in the first quarter and from 6.81 percent from a year earlier.

Meanwhile, Hon Hai's operating margin -- the difference between sales and the cost of goods sold and operating expenses -- dropped to 1.47 percent in the second quarter from 2.4 percent in the first quarter and from 2.71 percent a year earlier.

Its net margin -- the difference between its gross profit and its total expenses, including interest payments and taxes -- also fell to 1.62 percent from 2.34 percent in the first quarter and from 1.94 percent a year earlier.

"The lower profitability partly came after Hon Hai's major subsidiary, FIH Mobile Ltd., incurred more losses," Tang said.

FIH Mobile, in which Hon Hai owns a 70 percent stake, posted a net loss of US$348.1 in the first half, up from US$196.9 million a year earlier.

"After the heavy losses in its share price, the stock has become technically weaker," Tang said. "The downturn could continue until the next technical support at around NT$80."

Source: Focus Taiwan News Channel