Foxconn posts T$17.5b net profit in Q2
TAIPEI: Foxconn posted secondquarter net profit well below expectations as a rise in component costs and unsold inventory weighed on the performance of the Apple supplier and world’s top contract electronics maker, analysts said.
The company, formally known as Hon Hai Precision Industry Co Ltd, reported net profit of T$17.49 billion (RM2.32 billion) late on Monday, 20 per cent short of analyst expectations and slightly below the year-earlier results. Foxconn shares fell more than three per cent yesterday.
Analysts said the results reflected concerns about a loss of momentum in global smartphone sales. Last week, Foxconn unit FIH Mobile Ltd posted a wider firsthalf loss and acknowledged that it faced a high risk of saturation in the smartphone market.
Foxconn’s results showed that its gross margin narrowed in the second-quarter in part owing to the cost of carrying unsold inventory of the iPhone X.
However, Vincent Chen, an analyst at Yuanta Research, predicted a brighter outlook projected by Apple would benefit Foxconn and boost its margins in the third quarter.
The company’s report also illustrates its moves to diversify by pushing into new areas such as display screens — it bought Sharp Corp in 2016 — autonomous car startups and investments in cancer research.
Still, Foxconn earns most of its profits from manufacturing smartphones for Apple and other brands and from Foxconn Industrial Internet, a unit that makes networking equipment and smartphone casings, among other things.
“Investment in factory automa- tion and component price hikes capped gross margin,” said Fubon Research analyst Arthur Liao.
Foxconn’s operating costs jumped 18.8 per cent in the quarter.