Hon Hai’s profit margin improves in Q3; EPS at NT$2

Taiwan-based Hon Hai Precision Industry Co. (??), an assembler of iPhones and iPads, reported an improvement in its profit margin for the third quarter compared with the previous three-month period, largely due to the launch of the latest iPhones by Apple Inc.

In a statement released on Friday, Hon Hai, the world's largest electronics maker, said that its earnings per share for the July-September period stood at NT$2.00 (US$0.006), compared with NT$1.02 recorded in the second quarter and NT$2.42 seen over the same period of last year.

Apple launched the 4.7-inch iPhone 7 and the 5.5-inch iPhone 7 Plus in September. Hon Hai serves as the sole assembler of the iPhone 7 Plus, while the firm is believed to share orders from Apple with Pegatron Corp. (??), another Taiwanese contract electronics maker, to roll out the smaller iPhone 7.

Due to the shipments of the iPhone 7 series, Hon Hai's gross margin, the difference between revenue and cost of goods sold, rose to 7.44 percent in the third quarter from 6.02 percent recorded in the second quarter. The third quarter gross margin marked a new high in three years.

In addition, its operating margin, the difference between sales and both the cost of goods sold as well as operating expenses, improved to 3.91 percent in the third quarter from 2.26 percent in the second quarter.

In the third quarter, Hon Hai posted NT$34.64 billion (US$1.09 billion) in net profit, up 95.84 percent from a quarter earlier but down 8.51 percent from a year earlier.

Market analysts said the third quarter EPS was shy of earlier expectations since Hon Hai booked the losses incurred by Japan-based Sharp Corp., in which the Taiwanese firm owned a 66 percent stake. The acquisition deal was completed in mid-August and Hon Hai was estimated to book NT$1.1 billion to NT$1.2 billion in Sharp's losses in the third quarter, analysts said.

In addition, Hon Hai's bottom line for the third quarter was affected by a stronger Taiwan dollar, which caused the firm to suffer foreign exchange losses and compromise its non-business profit. Still, the third quarter EPS was the highest for this year.

Looking ahead, analysts said that since the fourth quarter is a traditional peak season for consumer electronics firms, there will likely be an increase in shipments of the iPhone 7 series in the October-December period, which will further boost Hon Hai's bottom line.

A recent market estimate showed that iPhone shipments for the fourth quarter could hit 75 million units, up 60 percent from a quarter earlier.

As for the first nine months of this year, Hon Hai posted NT$79.90 billion in net profit, down 14.94 percent from a year earlier with EPS at NT$4.62, compared with NT$6.03 recorded a year earlier.

Meanwhile, Hon Hai announced plans to invest US$270 million or about NT$8.6 billion in China to produce optical, glass and metal accessories. Analysts said the investments aim to take orders from Apple for production of the next generation iPhones since the U.S. consumer electronics giant is likely to use glass casings for the upcoming iPhones in 2017.

Hon Hai runs a broad production base in China, employing about 1 million workers to roll out products for international brands.

Source: Focus Taiwan News Channel