Hon Hai subsidiary issues profit warning

Taipei, FIH Mobile Ltd., a major subsidiary of Taiwan-based manufacturing giant Hon Hai Precision Industry Co., has issued a profit warning, saying its net losses for the first half of this year could be greater than in the same period of 2017.

FIH, which is about 70 percent owned by Hon Hai, said that due to US$26.60 million in foreign exchange losses in the first quarter of the year, its net loss for that period could hit US$126 million.

Under such unfavorable circumstances, its net losses for the first half of the year could exceed the US$199 million recorded in the same period of last year, the company said.

In the first quarter of last year, FIH, which is currently listed on the Hong Kong stock exchange, saw about US$6.7 million in foreign exchange gains.

The company projected its sales for the first quarter will hit US$3.19 billion.

FIH is a contract cellphone manufacturer that has a broad production base in China and clients that reportedly include major Chinese smartphone brands such as Xiaomi, OPPO, Huawei and ZTE.

In the second half of 2017, the company said, it recorded a depressed gross margin and net losses of US$326.32 million, issues that have extended into this year.

In addition, it said, increasing operating costs in its integration, innovation, design and manufacture (IIMD) business is expected to further squeeze it bottom line this year.

Market analysts here have said that the profitability of Hon Hai, also known as Foxconn in the global market, is likely to be affected by the problems of FIH, in which it holds a majority stake.

However, investors in Taiwan ignored the FIH profit warning Tuesday and Hon Hai shares continued to climb from the previous session, in line with the broader market, on bargain hunting.

Hon Hai, one of the top large-cap stocks in Taiwan, closed up 1.23 percent at NT$82.60 (US$2.77) on the Taiwan Stock Exchange, while the benchmark weighted index ended up 0.82 percent at 10,691.38.

Source: Focus Taiwan News Channel