Valuetronics reported Wednesday its fiscal first quarter net profit fell 3.1 percent on-year to HK$48.1 million (S$8.49 million or US$6.13 million) as the U.S. trade war is spurring customers to seek production outside China.
Revenue for the quarter ended 30 June declined 7.1 percent on-year to HK$654.3 million, the contract manufacturer said in a filing to SGX.
“The trade tensions between the U.S. and China are escalating, showing no immediate signs of abatement, and this will continue to affect the group’s operations negatively,” Valuetronics said, pointing to recent U.S. threats to impose additional tariffs on imports from China.
“Such escalated trade tensions had resulted in more and more customers deploying diversified procurement strategies, such as adopting and/or evaluating the options of assembling their products out of China,” the company added.
Around 45 percent of the quarter’s revenue was for shipments to the U.S. and around half of the U.S. shipments from China were subject to a 25 percent tariff imposed on Valuetronics’ customers, the filing said.
The consumer electronics segment reported revenue decreased 9.9 percent on-year to HK$240.8 million on lower demand from some customers.
The industrial and commercial electronics segment posted revenue of HK$413.5 million, down 5.3 percent on-year, on lower demand from some customers.
Other income rose 43.1 percent on-year to HK$7.8 million on increased interest income, the company said.
In its outlook, Valuetronics pointed to its efforts to add production sites in Vietnam.
“The group’s Vietnam expansion is progressing as planned. The group’s leased site in Vietnam has been qualified by a customer and the mass production has begun since June 2019, with shipments made from Vietnam to the U.S. market,” Valuetronics said. “Moving forward, the group intends to acquire a plot of land in an industrial park to build its own manufacturing campus in Vietnam.”
Valuetronics added that it expects the group to remain profitable for the fiscal year ending 31 March 2020.
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