Hon Hai Q3 net profit rises 80% quarter-on-quarter

Hon Hai Precision Industry Co. is the most important iPhone assembler. (NOWnews)
Hon Hai Precision Industry Co. is the most important iPhone assembler. (NOWnews)

TAIPEI (CNA) — Hon Hai Precision Industry Co., the world’s largest contract electronics maker, reported Wednesday that net profit for the third quarter soared 80 percent from a quarter earlier on the back of peak season effects.

At an investor conference, Hon Hai said its net profit for the July-September period stood at NT$30.66 billion (US$1.01 billion), up 80 percent from NT$17.05 billion in the second quarter. The third quarter figure was also up 23 percent from a year earlier.

The company’s earnings per share rose from NT$1.23 in the second quarter to NT$2.21 for the third quarter, while also growing from NT$1.57 in the same period of last year, Hon Hai said.

Due to the improving bottom line, Hon Hai said its future cash dividend payout ratio is expected to be at least 40 percent.

In the July-September quarter, Hon Hai, also known as Foxconn on the global market, posted NT$1.39 trillion in consolidated sales, up 1 percent from last year.

The third quarter is a traditional peak season for the consumer electronics industry and such peak season effects are expected to continue into the fourth quarter, market analysts said.

Hon Hai, the most important iPhone assembler, is expected to continue to ride peak season effects on the back of the year-end buying spree to report higher earnings for the current quarter, analysts said.

In the third quarter, Hon Hai’s gross margin — the difference between revenue and cost of goods sold — rose to 6.01 percent from 5.31 percent in the second quarter, while its operating margin — the difference between sales, the cost of goods sold and operating expenses — stood at 2.41 percent, up from 1.34 percent.

Meanwhile, Hon Hai’s net margin — the difference between its gross profit and total expenses, including interest payments and taxes — also rose from 1.47 percent in the second quarter to 2.21 percent in the third quarter. Analysts said the increase in profit margins reflected Hon Hai’s efforts to improve its product portfolio and rein in costs, while the better than expected sales of new iPhones, which went on global sale in September, boosted the company’s shipments.

In the third quarter, consumer electronics devices accounted for 49 percent of Hon Hai’s total sales, industry-use products 23 percent, and computing devices 21 percent.

At the investor conference, Hon Hai Chairman Liu Young-way (劉揚偉), who succeeded founder Terry Gou (郭台銘) in June to lead the company after Gou jumped into politics, said the company will continue its efforts to transform itself through digital technology to push up profit margins further.

Liu said Hon Hai is upbeat about the electric car, digital medical care and robotics industries, expecting the three to deliver 20-30 percent compound annual growth over the next few years, so the company has focused on these areas.

In addition, Hon Hai has also invested in artificial intelligence, semiconductors, 5G and even 6G technology for future growth, Liu said.

Hon Hai has sufficient cash flow and faces no current funding concerns, he added.

By Chung Jung-feng and Frances Huang