VTech profit up 17.9pc to US$216m but warns on surging oil costs

VTech Holdings, a telephone and electronic educational toymaker, said earnings last year rose 17.9 per cent on cost controls but expected a decline in sales and profit in the coming months due to surging oil prices.

Net profit rose to US$215.7 million for the year to March from a year ago. Sales grew 6 per cent to US$1.55 billion, compared with US$1.46 billion. Gross margin rose to 37.6 per cent from 36.9 per cent due to increasing economies of scale.

'Our sales in the US were still very satisfactory from April to June,' said VTech chairman and chief executive Allan Wong Chi-yun. 'But it is prudent not to foresee growth for the financial year 2009 as economic conditions in our markets, especially the United States, are worsening.

'In addition, cost pressures will continue owing to the high oil price, rising labour costs and inflation on the mainland.

'We will continue to manage costs closely to maintain our gross margin while launching more new products.'

Kenny Tang Sing-hing, associate director at Tung Tai Securities, said: 'VTech may have to face a tough Christmas this year due to weak sentiment in the US consumer market.

'Besides, VTech's electronic learning products will probably face margin pressure as they have to compete with a flux of low-price personal computers.'