Johnson Electric set for a rebound
Johnson Electric Holdings, a leading manufacturer of micromotors, should see a better year ahead after reporting poor results for the financial year today, analysts predict.
In April, the firm warned of a 20 to 25 per cent drop in net profit to about US$115 million for the year to March, citing rising steel and copper prices, restructuring charges and the closure of international factories. The company's share price has fallen by more than 50 per cent since September last year.
However, several brokerages and research firms, including Kim Eng Securities, DBS Vickers Securities, ING Financial Markets and BNP Paribas Peregrine are predicting a rebound in the company's net profit next year to a level comparable with last year's net profit of US$150 million.
'We're looking at a pretty decent pickup in bottom line next year,' said ING analyst Paul Snelgrove. He added that the expected drop in net profit for this year includes a one-time write-off of US$14 million to $17 million for restructuring and factory closures in Thailand, Mexico and Germany.
Johnson Electric's profit margins were also affected by copper and steel prices, which rose about 30 per cent in the past year, BNP Paribas Peregrine analyst Mohan Singh noted in a recent research report. However, he said the company had been able to pass on some of these rising costs to customers, helping it stabilise profit margins going forward.
DBS Vickers Securities analyst Joseph Ho is less sanguine. 'If the company is unable to pass on costs, and if copper and steel prices remain high, the company should have another year of eroding margins,' he warned.
Mr Snelgrove predicted Johnson Electric's revenues would rise 10 per cent in the coming fiscal year, while DBS Vickers is projecting a similar rise to US$1.16 billion from $1.05 billion last year.
According to Mr Ho, Johnson Electric's revenue growth should be driven by outsourcing, new applications for its motors and possible acquisitions. The firm has more than US$170 million cash and has expressed a desire to acquire rivals.