Hi-P International PATMI remains flat at S$3.1m

34.5% sales jump didn't improve profits.

DBS reports that Hi-P International posted stagnant profits despite strong sales growth in 3Q13.

Hi-P reported PATMI of S$3.1m in 3Q13, flat versus the same period the year before, despite a strong 34.5% jump in sales to S$365.2m.

On a qoq comparison, net profit plunged 71.2% although revenue still grew 28%.

Gross margins fell to 6.5% from 8.8% in 3Q12 and 10% in 2Q13 due to higher cost of materials as a result of more high level assembly work, as well as increased labour costs and higher inventory provisions, according to DBS.

Looking forward, Hi-P said it is expecting lower 4Q13 and 2H13 earnings even amid growing sales.

"Although smartphones and tablet volumes are expected to continue to increase, Hi-P may not enjoy the full benefits yet as the company remains focused on customer diversifications and continued streamlining of cost structure and production capacities," reckoned DBS.

"Near term, earnings would inevitably be impacted by costs of rising automation which is necessary to combat China’s long term trend of rising labour costs," it added.