Hon Hai’s Q1 earnings plunge over 95% sequentially amid COVID-19

Taipei,  Hon Hai Precision Industry Co., the world’s largest contract electronics maker, said Friday the COVID-19 outbreak sent its first quarter net profit plunging by more than 95 percent from a quarter earlier.

The new coronavirus forced massive lockdowns in China, limiting the movement of people and interrupting production of many manufacturers, including Hon Hai, which has a major production presence and a workforce of more than 1 million in China.

At an investor conference, Hon Hai, also known as Foxconn in the global market, announced a first quarter net profit of NT$2.083 billion (US$69.67 million), the lowest since the first quarter of 2008.

That was down 95.6 percent from a quarter earlier, and also down 89.5 percent from a year earlier.

It reported earnings per share of NT$0.15, compared with NT$3.45 in the previous quarter, and NT$1.43 in the first quarter of 2019.

In the January-March period, Hon Hai posted consolidated sales of NT$929.13 billion, down 46.6 percent from a quarter earlier and down 12 percent from a year earlier.

Profit margins also tumbled.

The company had a gross margin — the difference between revenue and cost of goods sold — of 4.5 percent in the first quarter, down 1.97 percentage points from the previous quarter, and its net margin — the difference between its gross profit and its total expenses — was down 2.37 percentage points to 0.49 percent.

Because the COVID-19 contagion escalated in China in January, working hours at the company fell more than 20 percent, but due to the efforts of all of its employees, the company’s sales fell by only 12 percent, Hon Hai said.

At the conference, Hon Hai Chairman Liu Young-way (劉揚偉) was upbeat about the company’s prospects in the second quarter as production at its major plants in China has returned to normal.

He expected sales in the second quarter to be 15 percent higher than in the first quarter, which would stabilize its gross margin.

Liu said stay-at-home measures have increased demand for devices for remote work and online learning, and sales of computing gadgets, and cloud-based office and education equipment are expected to rise by more than 15 percent from a quarter earlier during the quarter.

He also expected sales of electronics components, including optoelectronics items, to grow by over 15 percent, Liu said.

Despite the expected recovery in the April-June period, Liu remained cautious over the second half of 2020 because of the continued uncertainty over how the virus will progress.


Source: Focus Taiwan News Channel

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