Apple Supplier Foxconn Guides To Flat Q1 After COVID-19 Disruptions Hurt Margins In December Quarter

Apple Inc. AAPL supplier Hon Hai Precision Manufacturing Company Limited HNHPF reported a fall in net profit for the fourth quarter as margins eroded amid operational challenges posed by the COVID-19 recurrences in China.

What Happened: Taipei, Taiwan-based Hon Hai, popularly known as Foxconn, said its fourth-quarter net profit fell 10% year-over-year to NT $40 billion ($1.3 billion). The top line, however, rose 4% to NT $1.963 trillion.

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The net profit numbers were roughly in line with estimates. Net profit margin contracted from 2.35% a year ago to 2.04%.

Foxconn assembles about 70% of Apple’s iPhones and due to the recurrent incidents of COVID-19 in China, where its main iPhone factory is located, it faced production disruptions.

Despite the mixed performance, Foxconn announced a cash dividend of NT$5.30 per share for the year, implying a record payout ratio of 52%.

Looking Ahead: Hon Hai projected roughly flat operating performance for 2023. Group’s Chairman Young Liu said the outlook for the Information & Communication Technology business will remain neutral this year despite limited visibility amid the global economic slowdown and monetary policy tightening in several countries as well as the tapering of pandemic-related product growth.

The fourth-quarter operational performance is also expected to be roughly flat relative to a year ago. Sequentially, the company expects a smaller-than-seasonal drop due to the easier comparison with the pandemic-hit fourth quarter.

The company underlined that its January shipments improved as production returned to normalcy at its Zhengzhou, China plant.

Price Action: Foxconn's OTC-listed shares rose 0.45%, to $6.54 on Tuesday, according to Benzinga Pro data

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