Hon Hai, Foxconn Feels Financial Squeeze As Labor Cost Increase

Posted on Apr 30 2012 - 7:04am by Editorial Staff

In a recent exchange filing, Hon Hai and its Foxconn unit are feeling under the financial squeeze as labor costs increase. Bloomberg reports that Hon Hai said that its first quarter net income came in at NT$14.9 billion, up from NT$14.4 billion a year ago but what fades here is that profits was lower than estimates.

“That poor result caught me by surprise,” said Vincent Chen, the top-ranked analyst covering Hon Hai according to data compiled by Bloomberg, who rates the stock “hold” at Yuanta Financial Holding Co. in Taipei. “The wage rises haven’t been passed on to customers yet, which impacted profits.”

According to a profit warning PDF put out by Foxconn International:

The Board believes that the expected significant increase in consolidated net loss of the Group for the six months ended 30 June 2012 was primarily attributable to lower demands from some of the Group’s major customers thus resulting in lower sales of the Group’s products, and decline in the Group’s gross profit margins principally as a result of unfavourable pricing changes and increased costs associated with product migrations.

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