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Hi-P International posts 25% fall in Q4 net profit amid US-China trade war

MAINBOARD-LISTED contract manufacturer Hi-P International plans to diversify its customer base and keep expanding outside of China, as various challenges beset the smartphone industry, which it serves.

Q4 net profit fell 24.9 per cent year-on-year to S$44.8 million in the three months to Dec 31, according to fourth-quarter results released on Thursday.

Hi-P, which also has clients in tablets and other consumer electronics, posted revenue of S$441.9 million for the period, down 10.2 per cent on the previous year.

It attributed the drop to "a decline in market demand from various segments".

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Besides the lower turnover, profit margins also suffered from more competitive pricing, lower economies of scale and labour cost growth on a higher minimum wage in China, said the company.

Hi-P has 12 factories across the globe, including in five Chinese cities - Shanghai, Chengdu, Xiamen, Suzhou and Nantong.

Earnings per share fell to 5.56 Singapore cents from 7.39 cents before.

For the full year, Hi-P's net profit was down 16.9 per cent to S$100.9 million on a 1.7 per cent dip in revenue to S$1.4 billion.

The company guided for similar revenue and lower profit in Q1 2019, compared with the previous year, as well as a similar full-year revenue and earnings performance in FY2019 as in the year just ended.

It said in its outlook statement that the Internet of Things has been a growth driver for the group, and added that it "has begun to gain traction" in the wearables segment.

Chairman and chief executive Yao Hsiao Tung said in a statement: "We are aggressively fighting for more projects, increasing our allocation with existing customers and diversifying our customer base in new regions such as China, North-east Asia and Europe. Furthermore, we are working on expanding into areas such as the automotive, medical and IoT ecosystem segments."

With a trade war underway between the United States and China, Mr Yao added that the company is expanding its manufacturing operations to countries such as Thailand, where it is already present, and is exploring mergers and acquisitions as a means to ramp up growth.

The board has recommended a final dividend of S$0.04 a share, the same as in the year before, "to reward shareholders for their continued support". This takes its full-year payout to S$0.05 a share.

Hi-P finished up by S$0.055 or 5.53 per cent at S$1.05 before the results were released.