Foxconn International Net Loss Narrows on Margins, Impairments

Foxconn International Holdings Ltd. (2038), the phone unit of the world’s biggest contract maker of electronics, said first-half net loss narrowed “significantly” on smaller impairment charges and wider gross profit margins.

The loss also shrank from the second half of 2010 as operating costs declined, the unit of Taiwan billionaire Terry Gou’s Hon Hai Precision Industry Co. said in a Hong Kong exchange filing yesterday. The statement is based on preliminary, unaudited numbers.

“The interim results will continue to show a loss, although such loss will be significantly less than recorded for the corresponding period in 2010,” Foxconn said in the filing. Foxconn didn’t give a number for the first-half loss, and hasn’t yet announced the date it will publish complete earnings.

Foxconn reported a first-half loss of $142.6 million last year as prices for phones fell. It will post a “dramatic improvement” in earnings this year after selling excess facilities and terminating unprofitable operations, Chief Executive Officer Samuel Chin said in May.

For all of 2010, Foxconn had a net loss of $218.3 million, compared with a profit of $38.6 million in 2009, as main customer Nokia Oyj (NOK1V) failed to keep pace with competitors including Apple Inc. (AAPL) and HTC Corp. (2498) in the smartphone market.

Foxconn gained 2.8 percent to close at HK$3.62 in Hong Kong trading yesterday, before the announcement. The stock has dropped 33 percent this year, compared with the 4.6 percent decline in the city’s benchmark Hang Seng Index.

Hon Hai companies raised wages for workers at their main manufacturing site in Shenzhen in southern China after a spate of employee suicides last year. The group is moving production to central and western China to mitigate rising labor costs.

To contact the reporter on this story: Hugh Chow in Hong Kong at hchow12@bloomberg.net

To contact the editor responsible for this story: Hugh Chow at hchow12@bloomberg.net

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