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Hon Hai Posts Record Profit Amid Holiday Sales Boom

Hon Hai Precision Industry Co. (2317), the Taiwanese assembler of Apple Inc. (AAPL)’s iPhones and iPads, posted record profit as year-end demand boosted sales of mobile devices and video-game consoles.

Fourth-quarter net income climbed to NT$42.6 billion ($1.4 billion), according to numbers derived from full-year company data filed to the Taiwan Stock Exchange yesterday. That compares with the NT$41.9 billion average of 13 analyst estimates compiled by Bloomberg. Profit rose to NT$106.7 billion in 2013.

Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One, combined with Christmas purchases of Apple devices and Kindles from Amazon.com Inc. helped Hon Hai post its strongest sales growth in almost two years. A narrower loss at its display unit, the return to profit at its Hong Kong-listed phone affiliate and improved production efficiency also boosted earnings at the largest company in Terry Gou’s Foxconn Technology Group.

“New products helped drive strong sales while also reducing Hon Hai’s dependence on Apple a bit during the quarter,” Alberto Moel, an analyst at Sanford C. Bernstein in Hong Kong who rates the stock outperform, said before the announcement. “Improved efficiency in production of Apple devices helps reduce costs and boost margins.”

Photographer: Kiyoshi Ota/Bloomberg

A customer plays a video game on a Sony Computer Entertainment Inc. PlayStation 4 (PS4) video game console at an electronics store in Tokyo. The releases of Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One, combined with Christmas purchases of Apple devices and Amazon.com Inc. Kindles, helped Hon Hai post its strongest sales growth in almost two years. Close

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Photographer: Kiyoshi Ota/Bloomberg

A customer plays a video game on a Sony Computer Entertainment Inc. PlayStation 4 (PS4) video game console at an electronics store in Tokyo. The releases of Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One, combined with Christmas purchases of Apple devices and Amazon.com Inc. Kindles, helped Hon Hai post its strongest sales growth in almost two years.

Innolux Corp. (3481), which makes liquid-crystal displays for Foxconn, posted a NT$1.34 billion loss for the period, less than half the the size of its year-earlier result. FIH Mobile Ltd., which supplies BlackBerry Ltd., on March 20 posted full-year profit of $77.3 million, compared with a loss of $316 million a year earlier.

Hon Hai, founded by billionaire Gou 40 years ago, doesn’t provide earnings forecasts, hold analyst meetings or explain its financial results.

Stock Performance

Hon Hai closed unchanged at NT$86.30 in Taipei before the earnings announcement. Its 7.7 percent advance this year outpaces a 1.9 percent gain in the benchmark Taiex index.

Record revenue and profit for the quarter contrasts with an otherwise weak year for the company, which employs more than 1.3 million people globally. A shrinking personal-computer market, slowing smartphone growth and increasing competition for its largest clients pushed sales to their slowest pace since the global financial crisis.

Fourth-quarter operating income climbed to NT$45 billion, from NT$41.7 billion a year earlier. That compares with the NT$45.5 billion average of 10 analysts’ estimates.

Photographer: Ashley Pon/Bloomberg

Hon Hai Precision Industry Co. signage is displayed outside the company's headquarters in the Tucheng district of New Taipei. Close

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Photographer: Ashley Pon/Bloomberg

Hon Hai Precision Industry Co. signage is displayed outside the company's headquarters in the Tucheng district of New Taipei.

Gou is investing in automation, mobile-phone networks and overseas facilities to offset a slowing global electronics industry and labor shortage, while bringing final assembly closer to customers.

Its board yesterday approved more than $180 million of investments in China to boost facilities to make electronic components, industrial robots, molds and software, the company said in separate filings.

Hon Hai may also sell as much as NT$24 billion of unsecured bonds and as many as 1 billion shares through global depositary receipts, it said yesterday.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Robert Fenner

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