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Foxconn doubles first-half earnings

PUBLISHED : Saturday, 02 September, 2006, 12:00am
UPDATED : Saturday, 02 September, 2006, 12:00am

Foxconn International Holdings, the world's largest maker of mobile telephones, said first-half profit more than doubled, beating market expectations, as it won market share by selling more low-end products and reduced costs through outsourcing.


The Taiwanese company said net profit rose to US$301.69 million for the six months to June, up 105 per cent from US$146.86 million a year earlier while sales increased 86 per cent to US$4.38 billion. Analysts polled by Reuters had an average profit estimate of US$259.3 million.


Shares in Foxconn, which makes handsets for Nokia and Motorola, surged 8.5 per cent to HK$22.30 yesterday, the highest closing since their debut on February 3 last year.


The company's stock, which rose 31 per cent in the first half, will be included in the benchmark Hang Seng Index from September 11.


'[Foxconn has been successful] in lowering the operating expense ratio, which has fallen to about 3.69 per cent in the first half of this year from 4.55 per cent a year ago, as a result of operating leverage and restructuring benefits,' said SinoPac Securities analyst Rafe Xu, who rated the stock 'outperform' in a report yesterday.


In June, Foxconn chairman and chief executive Samuel Chin Wai-leung said the company would sell more low-end products to emerging markets and budget about US$400 million this year.


He said part of this year's budget of US$400 million would be used in building plants in India, Brazil, Mexico and the mainland. With production shifting to developing countries, Foxconn earlier said it planned to cut staff at its Finland operations to lower cost.


The company's 'expansion plan in India, China, Mexico and Brazil should help future volumes', Citigroup said in a report last month when it raised the stock's rating to buy from hold.


According to analysts polled by Thomson Financial, Foxconn was expected to achieve 73 per cent sales growth to US$10.9 billion this year and net profit to rise 70 per cent to US$652 million.


Merrill Lynch said in a report Asian-based companies such as Foxconn would benefit from the growth of handset vendors Nokia and Motorola, which had a combined global market share of 56 per cent.


'The handset market has been growing 28 per cent in the second quarter in 2006 from a year ago or 26 per cent up from the first quarter,' the report said.


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