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Hi-P net profit drops 2.7 per cent to S$32.9 million, guides for lower profit for Q4 and FY2019

MAINBOARD-LISTED contract manufacturer Hi-P posted a 2.7 per cent drop in net profit of S$32.9 million for the third quarter, as a result of compressed gross profit margin and higher administrative, selling and distribution expenses. And it guided for a lower revenue and profit for the fourth quarter and the whole year.

The contract manufacturer of smart phones, tablet computers and other consumer electronics released its weaker financial results on Wednesday, attributing three factors that led to the decline in gross profit margin by 1.3 percentage points year-on-year to 14.2 per cent for the three months ended Sept 30.

They are price pressure, higher labour content arising from more complex manufacturing processes and more stringent quality controls required bycustomers for certain products, and higher tooling amortisation costs. This came despite higher top line registering a 5.4 per cent improvement year-on-year to S$397.5 million.

Also, the increase in total selling, distribution and administrative expenses did not help. This was mainly due to higher staff costs resulting from annual salary increments, and higher consultation and other professional fees incurred to improve operational efficiency and for merger and acquisition purposes.

As a result, net profit declined 2.7 per cent from S$33.8 million to S$32.9 million. Earnings per share dropped to 4.10 Singapore cents from 4.19 Singapore cents for the year-ago period. In spite of this, a dividend of 0.8 Singapore cent has been recommended for payout on Nov 18, marginally lower than the one cent declared a year ago.

Hi-P's net asset value per share rose to 71.82 Singapore cents, or 9 per cent higher than the 65.92 Singapore cents for the corresponding period a year ago.

Executive chairman and chief executive Yao Hsiao Tung said in the statement issued with the results: "As the United States and China continued to battle over trade and politics across the world, the outcome of the US-China trade talks remains uncertain. The adverse impact of the US-China trade war continues to affect overall business environment regardless of whether the world’s two largest economies can arrive at a final truce in the near future.

"Within Hi-P, we have taken several measures to tackle the global economic headwinds and such effort has moderated the adverse impact. We have diligently continued our effort in diversifying regional markets and product mix, exploring suitable merger and acquisitions opportunities, computerising system flows with the aid of artificial intelligence, improving automation initiative, diversifying process abilities etc. We trust that these corporate strategies and plans will enhance our future performance."

Still, it has guided for lower revenue and profit year-on-year for the fourth quarter this year, higher revenue and profit for the second half of this year compared to the same period last year, and lower revenue and profit for this year compared to last year.

The counter ended two Singapore cents or 1.41 per cent lower at S$1.40 on Wednesday, before the financial results were issued.

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