Hi-P

Hi-P: 2Q15 net loss deepened to $7.9m (+164% y/y), pushing 1H15 losses to $21.7m (+42.3%), well off full year profit estimate of $10.4m.

Although revenue jumped 48.2% to $314.7m on higher customer orders, gross margin contracted 2.5ppt to 4.1% amid higher scrap and rework expenses as well as start-up cost for new projects, which included inventory provisions, product introduction, direct labor and depreciation costs.

The strain on bottom line was exacerbated by higher selling and distribution expenses of $3.4m (+85.8%), admin expenses of $17.9m (+13.3%), financing cost of $0.9m (+223%) and a FX loss of $4m, but partially offset by $2.3m in fair value gains from FX derivatives.

Borrowings increased to $278m from $215.3m in Dec due to higher capex and working capital requirements during the quarter. Cash and cash equivalents shrank to $109.2m from $213.1m as at end 2014. Consequently, the group saw its net gearing rise to 31.7% from an almost balanced financial position.

Management expects its business to turn around in 2H15 given the strong growth in smartphone shipments in India, Indonesia, and other emerging economies. In particular, the ramp-up at its Jin Hai and Nanhui plants in China is progressing well and poised for higher order allocation, while construction of the Nantong plant has been completed and has commenced mass production.

As such, the group guided that its 2H15/FY15 revenue and profit will be higher than that of 2H14/FY14.