Hong Kong company reporting season

Shares in Apple supplier AAC touch lowest in 18 months as quarterly earnings miss forecasts

The company reports an almost 40 per cent fall in second-quarter earnings as global smartphone shipments slow

PUBLISHED : Wednesday, 22 August, 2018, 6:00pm
UPDATED : Wednesday, 22 August, 2018, 11:02pm

Shares in AAC Technologies Holdings, a major supplier of components to Apple, briefly fell to their lowest intraday level in 18 months on Wednesday after a slowing global smartphone market pushed the company’s earnings in the latest quarter below expectations.

In afternoon trading in Hong Kong, AAC fell as much as 10 .6 per cent to HK$78, its lowest level since February 3, 2017, before recovering to close 1.3 per cent higher at HK$88.35 on volume of 22.7 million shares. The stock is down about 37 per cent so far this year.

The company said net profit fell 38.7 per cent in the second quarter from a year earlier to 653 million yuan (US$95 million), missing the median forecast of 1.09 billion yuan in a Bloomberg survey.

For the six months ended June 2018, net profit fell 16.4 per cent from a year earlier to 1.78 billion yuan while turnover dropped 2.5 per cent to 8.4 billion yuan.

Company chairman Koh Boon Hwee said in a statement to the stock exchange that there was a continual contraction in the global smartphone market this year.

In a report in July, market analysis firm IDC said smartphone companies shipped 342 million units in the second quarter of 2018, a 1.8 per cent fall from the same period a year earlier and the third consecutive quarter of year-on-year declines.

Koh said AAC was exposed to foreign exchange risks because its reporting currency is in yuan while sales to overseas customers are predominantly in US dollars. Another risk was rising interest rates on bank loans it took out for working capital and to fund expansion.

Koh noted that the US Federal Reserve raised interest rates twice this year, meaning that AAC’s effective interest rate on fixed-rate bank loans rose to a range of 2.60 per cent to 4.35 per cent a year, while the effective interest rates on variable-rate loans rose to between 1.27 per cent and 3.51 per cent.