HI-P INTERNATIONAL is paying a first and final dividend of 1.0 cents per share, representing a payout ratio of 78.1%.
FY2014's dividend per share is 67% higher than the 0.6-cent paid for FY2013.
The global contract manufacturer posted an increase in net profit attributable to shareholders of 63.6% year-on-year to reach S$10.5 million. It was boosted by a fire insurance claim and a gain from the liquidation of Hi-P Mexico.
In FY2013, its profitabiliy was hurt by impairment losses due to the consolidation and relocation of its plant from Tianjin to Suzhou, as well as a fire in a manufacturing plant in Shanghai.
CEO Yao Hsiao Tung. Photo: Company
FY2014 revenue was S$951.4 million, 24.6% lower than a year ago mainly due to a decline in orders from two key customers as a result of the drop in their market demand and changes in business direction.
"FY2014 was below our expectations, but we have made crucial changes that position us for future growth," said CEO Yao Hsiao Tung at the Group's results briefing at Fullerton Hotel on Friday (Feb 13).
"Our restructuring to transit from focusing on high precision plastics components to metal takes about 12 to 14 months and we are almost done," said deputy CEO El Tay.
"We have improved technology by acquiring CNC equipment to enhance operational efficiency and develop more business for metal components," added Mr Yao.
"We also intend to expand our ODM business into wireless, lifestyle and medical segments," he said.
The Group invested S$113.9 million in capital expenditure in FY2014.
Details on its financial results can be found here.
The following is a summary of questions raised by analysts and fund managers at the results briefing, and the answers provided by Mr Yao, Mr Tay, COO Gary Ho and CFO Samuel Yuen.
L-R: CFO Samuel Yuen | CEO Yao Hsiao Tung | Deputy CEO El Tay | COO Gary Ho.
Photo by Sim Kih
Q: What is the current yield and volume for your metal casing business, and its outlook for this year?
Mr Tay: We went into metal processing in a big way last year. We went through a learning curve in 4QFY2014. As of today, we have reached our yield targets. However, factors other than yield affect profitability. For example, how efficiently we use the cutters and consumables.
We intend to grow this business segment. We have customers lined up to fully utilize our metal processing factory capacity for the rest of the year.
Mr Yao: There is a costly learning curve because there are over one hundred processes for Xiaomi's project. Many of our competitors faced the same situation when they began to produce for Xiaomi. We are newcomers to metal processing but we improved our yield quite quickly. It took us about 3 to 4 months to significantly bring down the cost of producing one precision component.
Xiaomi recently announced that it intends to launch a 5.7” Xiaomi Note. This involves nano moulding for aluminium machining. Again, we will face a learning curve. I believe we will be able to catch up.
We believe we will break even for metal processing in FY2015. I am confident that after this year, this segment will become very important to us. It should also be profitable.
Q: Do you have customers other than Xiaomi for your metal processing facilities?
Mr Yao: Yes, we have several other customers. Our CNC machines will easily double this year.
Mr Tay: We intend to add a few thousand CNC machines, depending on the actual loading.
Mr Yuen: The few thousand machines include equipment for co-investment projects as well as leasing arrangements.
Mr Ho: A big number of our projects are using co-invested capital equipment. Our customers co-invested with us because they are confident about our ability to deliver and wanted to ensure ample supplies from us.
Q: Will you remain in net debt for FY2015?
Mr Yuen: Yes, we will remain in manageable net debt this year. Last year, it was only S$2.2 million.
Q: Can you share about your (original design manufacturing) ODM business?
Mr Ho: We acquired a design centre from Motorola. For the first two years, the design centre was under obligation to serve only Motorola. Since last year, we started our ODM business and acquired a few more customers in addition to Motorola.
We have ventured into different segments of ODM. Now, we do not only design handsets, but are also venturing into designing lifestyle products. One product we recently launched was the 360-degree camera. It was designed and manufactured by our ODM team.
Another area we are venturing into is Internet optics. Today, electronic appliances in the home are becoming more intelligent. This area is our core strength – that is, putting wireless modules into home electronics products. This is another major segment that we are pursuing.
We saw very healthy growth last year for the entire ODM segment and we will continue to see growth for the year ahead.
Hi-P expects to post a net loss in 1QFY2015. The good news is: It expects FY2015 revenue and net profit to exceed FY2014's.
Q: Why are you expecting a loss in 1QFY2015?
Mr Yuen: We had some start-up costs for our Nantong plant, which will commence operations this March. Before that, in January and February, we will incur labour cost for workers who are testing the machines. We also have some fixed and semi-fixed costs such as asset depreciation. We are expecting to incur a few million dollars of losses.
The loading during 1QFY2015 will be relatively low due to cessation of work during Chinese New Year celebrations. The first quarter is seasonally tougher because of this.
We are expecting new orders during the second quarter. This is for new project with an existing client, with order ramp up only in the second half of Q2.
Mr Yao: Without the burdens mentioned by Samuel, we would have been profitable in 1QFY2015.
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