Valuetronics reports fiscal year net profit fell nearly 3 percent as trade war hits orders

Hong Kong currency notesHong Kong currency notes

Contract manufacturer Valuetronics reported net profit for its fiscal year fell 2.6 percent on-year to HK$199.48 million (S$35.05 million or US$25.41 million) on slowdown in smart LED lighting orders as the U.S. trade war hurt orders.

Revenue for the year ended 31 March slipped 0.9 percent on-year to HK$2.83 billion, the company said in a filing to SGX before the market open.

RHB had forecast total turnover of HK$2.84 billion and recurring net profit of HK$197.1 million.

Industrial and commercial electronics (ICE) revenue rose 14.6 percent on-year to HK$1.67 billion on increased demand from existing customers and a new product from a new customer, the filing said.

“This growth in the ICE segment came from a strong demand from the group’s printer customers, a new version of connectivity module phased in by the group’s automotive customer, as well as the contribution from new customers featuring IOT products,” Valuetronics said.

The ICE revenue increase offset a consumer electronics’ (CE) revenue decline of 16.9 percent to HK$1.16 billion, the filing said.

The CE segment saw a slowdown in orders for smart LED lighting products as the smart-lighting customer extended its supply chain outside China, Valuetronics said.

In a note earlier this week, RHB said U.S. orders comprise more than 50 percent of smart-lighting orders, with the segment accounting for 10-15 percent of the topline.

Selling and distribution expenses increased 9.4 percent on-year to HK$41.48 million, while administrative expenses rose 9.7 percent on-year to HK$177.20 million, the filing said.

Valuetronics declared a dividend of 5 Hong Kong cents and a special dividend of 5 Hong Kong cents, compared with an interim dividend of 7 Hong Kong cents and a special dividend of 5 Hong Kong cents a year earlier.

In its outlook, Valuetronics said the U.S.-China trade tensions were creating an “unpredictable risk” for its operations, with more custmers looking for options outside of China for assembling their products.

“As trade war tensions between the U.S. and China continue, we have identified Vietnam as a location to expand our production outside of China. We expect one of our customers to qualify our initial set up in Vietnam by end of June 2019, followed by mass production for shipment from Vietnam to the U.S. market,” Ricky Tse Chong Hing, chairman and managing director of Valuetronics, said in the statement.

Valuetronics added that it may further expand its Vietnam production capacity by building its own manufacturing facilities, as well as expanding its North American footprint by exploring acquisition opportunities.

The company said it expects to remain profitable for the current financial year.

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