Foxconn shares down over 6 pct after profit warning
HONG KONG, July 24 (Reuters) - Shares of Foxconn International Holdings (2038.HK) fell more than 6 percent on Friday after the handset maker's profit warning, but some analysts said the company's operational decline may have hit bottom and a gradual improvement is expected in the second half.
The stock hit a low of HK$5.25 in morning trade, and ended the session at HK$5.28, still down 6.2 percent, while the benchmark Hang Seng Index .HSI was only down 0.46 percent.
The analysts said the macroeconomic environment had turned a corner and looked less worrisome in the second half than the first six months, when earnings were hit by price cuts, reduced foreign exchange gains and asset-impairment losses.
"H2 still doesn't look very pretty year-on-year and may show some remaining weakness but we believe that operationally, the numbers will be better sequentially," said JP Morgan analyst Charles Guo.
Foxconn, a unit of Taiwan's Hon Hai Precision (2317.TW) said late on Thursday it expected to see a significant decline in first-half earnings and might record a loss due to lower demand and pricing for its products amid the global economic downturn [nHKG260440].
The company, a supplier to top brands such as Motorola MOT.N, Nokia (NOK1V.HE) and Sony Ericsson (6758.T) (ERICb.ST), said a reduced foreign exchange gain and impairment on assets also hit its first-half results.
"Our estimates are 30 percent below consensus but the company seems to have done even worse. It has to do mainly with the forex losses and the asset impairments," said Christine Wang, analyst with HSBC in Taiwan.
Wang said the company's outlook for the second half, while stronger than that in the previous six months, was still cloudy since Nokia has already sounded a note of caution. [nLG204714]
Analysts also dismissed concerns over the potential impact on Foxconn's handset manufacturing deal with Apple Inc (AAPL.O) by the current investigation into the death and allegations of suicide of an iPhone worker in China, saying orders did not look affected at this point.
"We haven't seen any impact on orders yet. There are rumours Apple may rope in other manufacturers but we think that is unlikely this year," Wang said.
The stock has rebounded by more than 105 percent this year, wiping out last year's 85 percent loss.
(Reporting by Nerilyn Tenorio; Additional reporting by Parvathy Ullatil; Editing by Muralikumar Anantharaman)
((nerilyn.tenorio@thomsonreuters.com; 852-28436441)) Keywords: FOXCONN STOCKS/
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