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Foxconn profits increase 86pc as phone sales soar

PUBLISHED : Thursday, 12 April, 2007, 12:00am
UPDATED : Thursday, 12 April, 2007, 12:00am
 

Contracts lift earnings to US$718m


Foxconn International Holdings, the world's biggest contract mobile-handset maker, said net profit last year jumped 86 per cent after it doubled sales in Asia, where the soaring economy continued to fuel demand for mobile telephones.


Profit rose to a record US$717.85 million from US$382.93 million in 2005, Foxconn said yesterday. Revenue soared 63 per cent to US$10.38 billion from US$6.36 billion.


'We ... continue to streamline our business to improve our efficiency and competitiveness,' Foxconn said.


The company and other handset makers benefited from more outsourcing contracts of handset production by global vendors, such as Nokia and Sony Ericsson, to Asia suppliers.


The company's mass production base in India started operations in the second half last year, Foxconn said. It also expanded strategic investments into Brazil, Russia, India and the mainland.


Sales almost doubled to US$6.4 billion last year from US$3.3 billion a year ago in Asia, from which it earned US$615 million, up from US285.8 million.


Profit from Europe was US$114.2 million on sales of US$1.46 billion while earnings from America was US$239.5 million on sales of US$2.48 billion.


Despite rising demand for handsets, competition in the industry remained intense and consolidation pressure persisted, Foxconn said.


'In 2007, the global handset market will be volatile and dynamic, due to further industry convergence and consolidation pressure,' it said. 'We believe the handset outsourcing trend will continue and we will be able to grow further with our customers.'


The company said it would keep expanding its production base in Langfang, Taiyuan and India, after using most of the US$538 million capital expenditure in the mainland and India last year.


The company was 'looking forward to another year of growth in 2007', Foxconn said.


Shares in Foxconn rose 5.4 per cent to close at HK$25.30 yesterday after Merrill Lynch upgraded the company's rating to 'buy' from 'neutral'. The increase and upgrade came before the earnings announcement.


'We expect Foxconn to further benefit from Nokia's share shifts to Asian suppliers and faster ramp-ups from Sony Ericsson and Samsung, despite the weakness at Motorola,' said Tony Tseng, an analyst at Merrill Lynch.


He expected revenue from Motorola would account for 40 per cent of Foxconn's sales next year, compared with 50 per cent last year.


Foxconn said it had a cash balance of US$633 million at the end of last year to finance future capital spending.


It cut debts by US$36 million last year, leaving it interest bearing borrowings of US$140 million. Given assets of US$4.5 billion, gearing was at 3.1 per cent, Foxconn said.


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