Hi-P International posts 16.9% rise in Q2 net profit on cost controls

MAINBOARD-LISTED electronics contract manufacturer Hi-P International's cost controls paid off in the second quarter, as earnings rose despite a decline in revenue.

Net profit for the three months to June 30 was up by 16.9 per cent year-on-year to S$14.4 million, according to results released on Thursday.

Revenue slipped by 5.2 per cent to S$286.4 million on price pressure and lower sales from some customers, as well as dilution in a loss-making flexible printed circuit board business. But the cost of sales fell more quickly, by 9.4 per cent, on what Hi-P called better cost management.

Changes to the product mix also helped to improve margins, alongside "more effective spending on new product introduction", Hi-P noted.

The financial statements noted that the circuit board decline "was cushioned by an increase in demand from customers in other segments such as consumer electronic products as the group continues to diversify its business".

"We have also increased our sales team in various regions to explore new business, including that of the medical and automotive industries," chairman and chief executive Yao Hsiao Tung said in a statement.

Meanwhile, new projects in Thailand have launched as scheduled, which Mr Yao said are meant to reduce the impact of the trade war between the United States and China on his business.

"We have also fought diligently for non-US related business to fill our operations in China," he added. Hi-P's manufacturing footprint includes plants in five Chinese cities, as well as Poland, Singapore and Thailand.

Earnings per share stood at 1.79 Singapore cents for the quarter, up from 1.52 Singapore cents in the same period the year before, while net asset value was 69.06 Singapore cents a share, against 70.44 Singapore cents as at Dec 31, 2018.

Hi-P reported an 11.9 per cent rise in net profit for the half-year to S$25 million, on a 1.7 per cent dip in revenue to S$573.2 million.

With the company on a quest to develop new customers and products, Mr Yao said that business transformation "has yielded some positive results", but added that "we have yet to realise our full potential".

"We have been on constant lookout for suitable M&A (merger and acquisition) opportunities which complement our business model and plans," he said. "With our effort, we hope to achieve positive results from our pursuit of M&As to benefit our long-term growth."

Hi-P doubled its interest in Chinese associate Cino Technology (Shenzhen) to 40 per cent in the first quarter, and also disclosed that it has taken a 10 per cent stake in a private original design manufacturer in China that makes battery packs, battery cells and chargers.

But Mr Yao flagged both US-China trade tensions and a separate dispute between Japan and South Korea as contributing to a "volatile and uncertain" and "turbulent" market worldwide.

The group said in its outlook statement that it expects to post higher revenue and similar profits in its third quarter to Sept 30, compared with the year-ago period.

No dividend was recommended, unchanged from the year before, which the board said was "to conserve cash for business growth".

The counter dipped S$0.01 or 0.72 per cent to S$1.38 on Thursday before the results were released.