Foxconn misses Q2 profit estimates

Hon Hai Precision Industry (the listed flagship of the Foxconn Technology Group; 2317.TPE) reported yesterday that it earned profits of NT$12.98 billion (US$447 million) in the second quarter, falling short of analysts’ estimates, Bloomberg reported. Analysts expected Hon Hai to earn US$506 million; instead profits were down 22% year-on-year. Foxconn makes hardware for technology brands including Apple (AAPL.NASDAQ) and Hewlett Packard (HPQ.NYSE), but labor and material costs have been rising even as client demand dampens. “It is virtually impossible for Hon Hai to be immune to the subdued consumer sentiment and the earnings guidance cut by its major OEM clients,” wrote Arthur Hsieh, a Taipei-based analyst at UBS (UBS.NYSE, UBS.SIX), in a note to investors. Even manufacturing the popular iPad has not done much for its bottom line: Foxconn CEO Terry Gou told investors that difficulties manufacturing iPads had cut into margins in June, but that he expected efficiency gains to eventually make iPad production more profitable.