Foxconn unit FIH Mobile poised to rebound from US$196.5 million loss in the first half
Contract electronics manufacturer expected to return to profit in the second half of this year amid fresh growth in smartphone shipments
FIH Mobile, the contract electornics manufacturer that assembles Xiaomi’s smartphones, is anticipated to report a turnaround in its second-half earnings, as increasing sales help it rebound from a loss in the first six months of the year.
“We forecast strong revenue growth of 48 per cent year-on-year for the second half of 2017, driven by a ramp-up in shipments from Nokia and increasing orders from India,” Daiwa Capital Markets analyst Kylie Huang said on Tuesday.
Huang also forecast FIH Mobile, a subsidiary of Taiwan-based Hon Hai Precision Industry, to record a net profit of US$94 million in the six months ended December 30, aided by a US$10 million gain from the disposal of some of its interest in smartphone photo editing app provider Meitu.
It would mark a quick recovery for FIH Mobile after it reported on Friday a US$196.5 million interim net loss, compared with a US$20.8 million net profit in the same period last year.
That loss had spoiled the company’s 89.6 per cent increase in interim revenue to US$4.4 billion, up from US$2.3 billion a year earlier.
FIH Mobile’s interim net loss was attributed to costs related to its deal with Finnish company HMD Global to buy Nokia’s mobile phone business from Microsoft Corp for US$350 million to develop a new Android smartphone business. It also reported an estimated US$160 million impairment loss on a US$200 million equity investment in e-commerce service provider Snapdeal, owned by Indian firm Jasper Infotech.
Those two investments also affected FIH Mobile’s parent Hon Hai, also known by its trade name of Foxconn, as it posted lacklustre second-quarter financial results due to higher consolidated operating expenses.
Daiwa’s Huang said earnings visibility for FIH Mobile, which also makes smartphones for Huawei Technologies and Oppo, “remains low over the next two years due to its investments in new businesses”.
FIH Mobile in June invested about US$3 million in a high-end smartphone start-up called Essential Products, led by Android founder Andy Rubin. That investment raised the United States-based firm’s valuation to US$1.2 billion, up from US$997 million in June, a Bloomberg report said.
FIH Mobile also recently invested about US$2.2 million in mobile devices distributor Jiangsu Liang Jin E-Commerce Holdings.
Shares of FIH Mobile have fallen for the sixth day in seven, dropping 0.4 per cent on Tuesday to HK$2.45 on the Hong Kong stock exchange.