Hi-P International reports 3Q19 net profit fell nearly 3 percent

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Hi-P International reported Wednesday its third quarter net profit fell 2.7 percent on-year to S$32.87 million as the gross profit margin declined.

Revenue for the quarter ended 30 September rose 5.4 percent on-year to S$397.50 million, the contract manufacturer said in a filing to SGX.

The gross profit margin fell to 14.2 percent, from 15.5 percent in the year-ago period, due to price pressure, higher labor content due to more complex manufacturing processes and more stringent quality controls required for certain products, Hi-P said. Higher tooling amortization costs also contributed to dampening margins, it added.

Selling and distribution expenses rose 11.5 percent on-year to S$3.23 million, mainly on higher staff costs from salary increments, consultation and professional fees to improve operational efficiency, the filing said.

Administrative expenses increased 11 percent on-year in the quarter to S$21.25 million, the filing said.

Other expenses more than doubled, rising 128.4 percent on-year to S$6.49 million, Hi-P said.

For the nine-month period, Hi-P reported net profit rose 3.1 percent on-year to S$57.9 million on revenue of S$970.72 million, up 1.1 percent on-year, coming in at around 64 percent and 68 percent, respectively, of Maybank KimEng’s forecasts for full year revenue of S$1.42 billion and core net profit of S$91 million.

Yao Hsiao Tung, executive chairman and CEO of Hi-P, issued a cautious outlook.

“The adverse impact of the U.S.-China trade war continues to affect overall business environment regardless of whether the world’s two largest economies can arrive at a final truce in the near future,” Yao said in the statement.

“Within Hi-P, we have taken several measures to tackle the global economic headwinds and such effort has moderated the adverse impact,” he said, adding those included diversifying regional markets and product mix, exploring suitable merger and acquisitions opportunities, computerising system flows with the aid of artificial intelligence and improving its automation initiative.

Yao said the plan to acquire South East Asia Moulding Co. was a strategic move to add a new customer, increase product offerings and strengthen technological capabilities.

In its earnings outlook, Hi-P guided for lower revenue and profit for the fourth quarter, compared with the year-ago period. It also said it expected higher revenue and profit for the second half of 2019, compared with the first half, and lower revenue and profit for the full year, compared with 2018.

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