Foxconn shares slide after profit warning

PUBLISHED : Saturday, 28 April, 2012, 12:00am
UPDATED : Saturday, 28 April, 2012, 12:00am

Foxconn International Holdings (FIH), the world's biggest contract manufacturer of mobile phones, saw its shares tumble in Hong Kong yesterday after it issued a profit warning for the first half of this year.

Kowloon-based FIH said it expected a 'significant increase in consolidated net loss' for the six months to June 30, largely due to lower demand from some of the company's major customers.

Its share price fell 15.8 per cent to finish at HK$3.78, its lowest close since reaching HK$3.71 on October 4.

In a filing with the Hong Kong stock exchange late on Thursday, chairman Samuel Leung Chin-wai said the company's gross profit margin had declined because of unfavourable pricing changes and increased costs related to new product manufacturing initiatives.

FIH is a 70 per cent owned subsidiary of Taiwan's Hon Hai Precision Industries, the world's largest contract electronics manufacturer, whose operations are collectively known under the trade name 'Foxconn Technology Group'.

While its parent company serves as the main supplier for Apple's top-selling iPhone and iPad, FIH has remained the key handset contractor to struggling Nokia and Motorola Mobility, which have lost market share in the last few years to the likes of Apple and Samsung Electronics.

According to market research firm Strategy Analytics, Samsung unseated Nokia as the world's largest mobile phone supplier in the first quarter. The Finnish company held that position from 1998 until last year.

'Nokia's global handset shipments declined a huge 24 per cent [year on year] to 82.7 million units,' Strategy Analytics executive director Neil Mawston said yesterday.

He said Nokia's shipments 'were squeezed at both ends' of the market as sales of its low-end handsets to emerging markets stalled and its high-end, Microsoft-based Lumia smartphone failed to offset lower demand for models using its abandoned Symbian operating system.

Bernstein Research senior analyst Alberto Moel said FIH had seen a steady decrease in product shipments over the last 12 months but had generated new orders from mainland brands Huawei Technologies and Xiaomi Technology.

FIH, which has also been challenged by rising wages on the mainland, lost its blue-chip status in Hong Kong last June when it was dropped from the Hang Seng Index after its shares declined 34 per cent in 2010.

14 The number of years Nokia reigned as the world's biggest mobile-phone supplier. Samsung supplanted it in the first quarter


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