Foxconn quarterly profit plummets, sees new growth from post-virus lifestyles

TAIPEI (Reuters) – Foxconn’s (2317.TW) first-quarter profit plunged to its lowest in two decades, all but wiped out, after the coronavirus pandemic forced the Taiwanese firm to suspend manufacturing operations in China and knocked demand from customers including Apple Inc AAPL.0.

FILE PHOTO: A motorcyclist rides past the logo of Foxconn, the trading name of Hon Hai Precision Industry, in Taipei, Taiwan March 30, 2018. REUTERS/Tyrone Siu/File Photo

But the world’s largest contract electronics manufacturer, formally called Hon Hai Precision Industry Co Ltd, said the worst of the virus outbreak for the company was over.

New growth was to be found in the work-from-home lifestyles being adopted around the world even if the outlook for smartphone and other consumer electronics demand remained bleak, it said.

“Hon Hai will stabilize in the second quarter,” Foxconn said in a statement, adding that all of its main factories in China have now resumed normal operations.

Net profit for January-March slumped 90% to T$2.1 billion ($70.3 million) from a year earlier – the lowest level since the first quarter of 2000 and well short a Refinitiv consensus estimate of T$8.88 billion. Revenue declined 12%.

For the second-quarter, the company expects revenue will show double-digit growth from January-March although it will still likely mark a single-digit decline from the same period a year earlier.

“Telecommuting, online entertainment and new lifestyles have brought us new growth momentum,” Foxconn Chairman Liu Young-way told an investor teleconference.

He added that its enterprise and computing units are expected to see a yearly revenue growth of more than 10% and more than 15% respectively in the current quarter.

The exception is its consumer electronics division, much of which is smartphones. The division is forecast to post a 15% yearly decline in sales as the virus is set to have “an enormous” impact on demand. In the first quarter, the division accounted for 42% of revenue.

“For consumer electronic products, because everyone is staying at home, naturally it affects consumers’ purchasing power and such power might take a very long time to recover,” he said.

Highlighting that weak demand, first-quarter smartphone shipments in China tumbled 20%, its largest decline ever, data from market researcher IDC showed this month.

Liu declined to given an outlook for the second half or the full year, saying the pandemic had made forecasting too uncertain.

Foxconn shares closed 1.4% lower ahead of the results on Friday, versus a 0.3% gain for the broader market .TWII. They have lost 15% for the year to date.

(Company corrects milestone in 1st and 5th paragraphs to two decade low, not nearly two decades)

Reporting by Yimou Lee and Ben Blanchard; Writing by Sayantani Ghosh; Editing by Edwina Gibbs

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