Hi-P International Q3 net profit down 11.9% on hit from trade war

CONTRACT manufacturer Hi-P International's earnings fell in the third quarter, tracking a drop in revenue, with the group guiding for lower turnover and revenue in the coming three months as well.

Net profit slid 11.9 per cent year-on-year to S$33.8 million for the quarter to Sept 30, according to unaudited results released on Wednesday, while revenue was down 8.3 per cent to S$377.1 million.

Hi-P attributed the revenue decline to fewer projects with high component content, lower market demand amid economic uncertainty and slower ramp-up for some kinds of new products, as well as a delay in the invoicing for certain production tools, which has been postponed to the fourth quarter.

Earnings per share slipped to 4.19 Singapore cents from 4.76 cents the year before, while net asset value was 65.92 Singapore cents a share against 65.44 cents as at Dec 31, 2017.

Chief executive Yao Hsiao Tung said in a media statement that the ongoing trade war between the United States and China has led to lower demand, as US customers sourcing from China would be hit.

"We are exploring ways to boost our domestic China and non-US business and optimise our other existing manufacturing sites based in different countries," said Mr Yao.

"In light of the turbulent market situation, the management team is taking proactive measures to cope with the challenges, including diversifying our business into different regions and market sectors as well as undertaking merger and acquisition projects to extend footprint outside China."

Hi-P said that it is "aggressively pursuing business development initiatives to expand the group's customer base in Europe and Asia".

Most of its plants are in China - a market from which it derived nearly three-fifths of its revenue in 2017. It also has a presence in Poland, where it makes and sells moulds and plastic components.

Mr Yao added: "In anticipation of the increasing sophistication of customers' projects, we will continue to strengthen our expertise to boost our competitiveness."

The group reiterated its commitment to moves such as boosting process automation to improve margins.

But it warned in its outlook statement that it expects lower revenue and profit for the fourth quarter and the full year, compared with the year prior.

Net profit for the nine months was down 9.2 per cent to S$56.1 million, while revenue edged up 2.7 per cent to S$960.2 million.

An interim dividend of one Singapore cent a share was recommended, down from two cents for the same period the previous year.

Hi-P added S$0.035 or 4.35 per cent to S$0.84 before the results were released.