Handset maker FIH Mobile cuts costs, returns to profit

HONG KONG Mon Aug 12, 2013 10:40am EDT

HONG KONG Aug 12 (Reuters) - FIH Mobile Ltd, the world's largest maker of mobile phones for big-name brands like Nokia, returned to profit in the first half of 2013 after a cost-cutting campaign as competition among handset makers intensifies.

FIH Mobile, formerly known as Foxconn International Holdings Ltd (FIH), reported a net profit of $17.66 million in the January-June period versus a net loss of $226.07 million in the same period last year, it said in a statement on the Hong Kong stock exchange on Monday.

The upturn signals that the worst may be over for FIH, which slashed operating and administrative costs during the period, although it still faces headwinds in a competitive market for handset makers. The company was driven to a loss in 2012 due to falling orders from one of its main clients, Nokia.

FIH flagged in June that it would return to profit in the first half, with brokerage Jefferies predicting a net profit of $8 million and BNP Paribas $2 million.

The upturn puts FIH on track to post a net profit for the full year after a stinging loss of $316.4 million in 2012, its worst year ever since listing in Hong Kong in 2005.

"As smartphone lifecycles are getting shorter, we think FIH will find it hard to allocate resources and to establish consistent order flow from smaller clients," Laura Chen, an analyst with BNP Paribas, said in a report before the release.

FIH's main clients include Sony, Huawei Technologies Co Ltd and Nokia Oyj, though analysts said it had obtained some orders from parent Foxconn Technology Group to make Apple Inc's products.

Chen said hopes that a boost in orders for Apple phones was unlikely to materialise to such a degree as to make a significant difference, as orders were weakening and parent Foxconn Technology Group was unlikely to need extra capacity from FIH for the time being.

Its Hong Kong-listed shares, which have gained more than 10 percent since the start of this year, ended 1 percent higher, versus the main Hang Seng Index's 2.1 percent gain.

FIH's announcement came after Hong Kong's market closed on Monday.(Reporting by Lee Chyen Yee and Yimou Lee, Editing by Thomas Atkins)