Foxconn cites product mix, crisis in profit warning
Foxconn International Holdings, the handset-making unit of Taiwan electronics giant Hon Hai Precision Industry, warned net profit for last year would decline significantly due to a different product mix and the worsening global financial crisis.
'The expected decline was primarily attributed to changes in product mix, lower demand and pricing due to global economic downturn, and higher operating costs,' the company said yesterday.
Operating costs were higher due to lower use of facilities, relocation of some plants and restructuring of global operations, it said.
Foxconn also blamed the decline on an increase in long-term investment in research and development, a smaller foreign exchange gain as well as a higher income tax expenses.
Pressure from labour, raw material costs and yuan appreciation in the first half of last year also had an effect. Business was further hit by dwindling demand in the second half amid a rapidly falling global economy.
Foxconn chairman and chief executive Samuel Chin Wai-leung (above) said in August last year profit might drop this year on lower sales to Motorola, despite more orders from Nokia and Samsung Electronics.
However, Macquarie analysts warned the worst was not yet over and predicted sales would fall 7 per cent this year. Macquarie also downgraded Foxconn's rating to 'neutral' and cut the target price from HK$6.60 to HK$3.60.
Shares of Foxconn closed down 3.53 per cent at HK$3.01 yesterday, the worst blue-chip performer.
