Contract manufacturer Hi-P International reported Thursday its first quarter net profit rose 5.8 percent on-year to S$10.7 million despite pricing pressures and a shift toward a lower-margin product mix, amid a smaller foreign exchange loss.
Revenue for the quarter ended 31 March increased 2.0 percent on-year to S$286.78 million, the company said in a filing to SGX.
The gross profit margin slipped 0.8 percentage point on-year to 12.6 percent on price pressure and a product-mix shift toward low-margin high component content assembly, Hi-P said.
Other income climbed 39.2 percent on-year to S$2.2 million, mainly on government incentives, rental income from factory leases and investment properties, and gains from selling scrap materials, the filing said.
Other expenses declined 70.9 percent on-year to S$3.3 million due to a S$7.9 million decrease in net losses from foreign exchange and fair value on hedging contracts, Hi-P said.
“Seasonally, our loading is generally lower for the first half of the year. Business competition has intensified and impacted our margin. However, with our control systems in place and continuing effort of everyone at Hi-P, we should achieve reasonably good results,” Yao Hsiao Tung, executive chairman and CEO of Hi-P, said in the statement.
“Market remains challenging but we are endeavoring to turnaround situation by penetrating different product fields,” Yao added, pointed to the expansion of the sales force in the U.S. and Europe and to efforts to strengthen the sales force in Asia.
In its outlook, Hi-P noted the International Data Corp. (IDC) has forecast global smartphone volumes would fall 0.8 percent this year, but that momentum in the second half of 2019 would show a pickup, with 2.3 percent growth on-year. For smart home devices, IDC forecast 26.9 percent on-year growth in 2019, the filing said.
In its guidance. Hi-P said it expected the second quarter of 2019 would have lower revenue and similar profit as the year-earlier quarter. It added that for the second half of 2019, it expected higher revenue and profit than in the first half of 2019, and for the full-year, it expected revenue and profit would be similar to 2018’s level.