Hi-P International swings back into the black with 8% sales growth

But it sticks to original expansion plan.

According to DBS, Hi-P reported PATMI of S $3m in 3Q12, reversing 2Q12’s loss of S$2m as sales grew 8% q-o-q to S$272m.

Here's more from DBS:

On a y-o-y comparison, however, revenue declined 12% due to delays in new programmes for smartphones, tablets and ebooks net profit more than halved from S$6.5m in 3Q11.

Sales were better than we had expected but net profit still fell short of our already reduced forecast of S$5.4m. Key variances were gross margin of 8.8% vs our forecast of 10.4% and slightly higher SG&A expenses.

Costs of maintaining a bigger production team ahead of the production ramp up resulted in net margins slipping by 100bps to only 1.1%.

Balance sheet remains healthy although still in expansion mode. Hi-P exited the quarter with net cash of S$82m despite having spent another S$65.9m of
capex in 3Q12. YTD, Hi-P has incurred capex of S$112.6m vs its full year budget of S$180m.

Despite intermittent disruption, Hi-P is sticking to original expansion plan in anticipation of stronger demand in the quarters ahead.

Guidance points to sequentially better 4Q12 and beyond. Growth will be underpinned by ramp up of new programs in 4Q12 and flowing over to FY13.

Overall, management is very confident of continued new businesses from smartphones/tablets. Hence, Hi-P will go ahead with its S$300m investment to expand capacity in Nantong. The new plant is expected to start operations in 2H13 and would raise production capacity by 50% when fully ramped up.