Valuetronics Q1 profit hit by softer demand amid US-China trade war

ELECTRONICS manufacturer Valuetronics Holdings reported a 3.1 per cent drop in net profit to HK$48.1 million (S$8.5 million) for its first quarter ended June 30, from HK$49.7 million for the year-ago period.

Earnings per share came in at 11.1 HK cents, down from 11.6 HK cents for the corresponding period last year, the mainboard-listed company reported on Wednesday morning.

No dividend was declared for the quarter, the same as last year.

Revenue fell 7.1 per cent to HK$654.3 million for the quarter due to weaker consumer and business confidence in the uncertain macro environment, Valuetronics said.

Its industrial and commercial electronics business contributed HK$413.5 million in revenue, down 5.3 per cent from a year ago, while revenue from consumer electronics decreased by 9.9 per cent to HK$240.8 million, amid lower demand from some customers in both segments.

Valuetronics said the escalating trade tensions between China and US will continue to affect the group's operations negatively.

Almost half (45 per cent) of the group's revenue came from shipments to the US during its first quarter, and around half of its US shipments from China were subject to the 25 per cent tariff imposed on its customers in the US.

In addition, US President Donald Trump has also threatened to impose additional 10 per cent tariffs on key Chinese goods, including laptops and cellphones. These tariffs were originally set to go into effect in September, but US Trade Representative Robert Lighthizer said on Tuesday that the US would hold off on imposing them.

"Such escalated trade tensions had resulted in more and more customers deploying diversified procurement strategies, such as adopting and/or evaluating options of assembling their products outside of China," Valuetronics said on Wednesday.

Meanwhile, in terms of the group's Vietnam expansion, its leased site in Vietnam has been qualified by a customer and mass production began in June 2019, with shipments made from Vietnam to the US market.

Going forward, Valuetronics intends to acquire a plot of land in an industrial park in Vietnam, to build its own manufacturing campus there.

Shares of Valuetronics closed unchanged at 60.5 Singapore cents on Tuesday.