TAIPEI Profit at Taiwanese contract maker Hon Hai Precision Industry's (2317.TW) grew less than expected in the first quarter, but the main maker of Apple Inc (AAPL.O) gadgets, whose plants have come under intense scrutiny over working conditions, was in party mood on Saturday.
Some 200 workers from its parent company Foxconn's plants in China sang, danced and cheered the company's billionaire founder at a party in Taipei marking the end of an all-expenses paid seven-day holiday the company arranged for top performing staff.
Foxconn has borne the brunt of criticism over working conditions at Chinese factories, in large part because of its association with Apple, and has become a symbol of the ethical debate over high-priced goods being made at low-cost plants, criticism it sees as unfair.
Over the past two years there have been a spate of suicides at the sprawling plants employing over a million workers making iPads and iPhones as well as gadgets for the likes of Microsoft and Nintendo. There has also been a deadly explosion at one plant and occasional fires.
Just two days ago, workers at a Foxconn plant in Wuhan, central China, protested over working conditions, with a report from a Hong Kong-based activist group saying some had threatened to jump off the roof of a building.
Hon Hai said the dispute was quickly solved without incident.
The company offered no explanation for the disappointing results which come after major customer Apple reported a quarterly profit that almost doubled on Wednesday and far exceeded forecasts thanks to a jump in iPhone sales, particularly in greater China.
The Foxconn group has gone on a charm offensive in recent months, raising wages several times, allowing a TV crew into one of its plants and sealing a landmark deal with Apple on improving working conditions that is likely to set a benchmark for western firms in China.
Chairman and founder Terry Gou said Saturday's event wasn't just for show.
"Some media said we're organizing this tour and event to change our sweatshop image, but this is a event we decided on a year ago," Gou told reporters.
"There is no image we need to change ... We have no problem standing before the open scrutiny of the world's media."
Next up for workers' benefits will be a hospital and language schools, Gou said.
Workers on the Taiwan trip attending Saturday's party said they were very happy with their working environment.
"Yes it's very good. It's always been very good," chorused three employees in unison as they snapped final souvenir photos in the canteen of the Hon Hai facility in Tucheng, just outside Taipei.
A fourth said he was aware of the bad publicity the company had drawn, but called it "biased."
None of the employees spoken to would give their names or phone numbers to reporters.
In a further move to boost conditions, Hon Hai said in its brief earnings statement released late on Saturday that it plans to issue restricted stocks and stock options for employee incentives, each involving 213.781 million new shares and representing up to 2 percent of the outstanding shares.
It said its net profit in the first quarter rose 3.6 percent to T$14.92 billion ($509.2 million), well down from the T$35.03 billion in the previous quarter and little changed from T$14.40 billion a year ago.
Nine analysts had forecast a profit of T$22.44 billion, according to a poll by Thomson Reuters I/B/E/S.
Hon Hai's Hong Kong listed affiliate Foxconn International Holdings (2038.HK), the world's top contract cell phone maker, warned of a substantial increase in its net loss for the first half of 2012 on Friday on lower demand from some of its key customers.
(Writing by Jonathan Standing; Editing by Jonathan Thatcher)