Hi-P INTERNATIONAL has swung from a $2.1 million net loss in 1Q to a $12.4 million profit in 2Q.
And the company has just said in its 2Q results statement that it expects its full year profitability to be comparable to last year’s $53.7 million.
Working backwards, that means Hi-P is expecting the 2H to bring in about $55.8 million, suggesting strong growth momentum going forward.
Asked at a briefing for analysts at Fullerton Hotel yesterday, the Hi-P management stopped short of saying the momentum would continue in the 1H of next year as it didn’t have full visibility of customer demand that far out, in part because of the nature of the electronics industry.
Reacting to the strong 2Q results, the stock price of Hi-P closed at 81.5 cents yesterday, up 6.5 cents. It has come a long way from 51 cents in mid-June this year, inspired in part by the significant buyback by Hi-P of its own shares.
Many a question at the briefing yesterday centred on the ramp-up. Here are some of the questions asked and answers received.
Q: What wage increase has Hi-P experienced and is it possible for you to pass on the wage increases to your customers?
Mr Yao Hsiao Tung, executive chairman and CEO: We will feel some of the impact. We will conduct ‘value stream mapping’ to improve productivity, we will automate and consolidate operations. We can pass the wage increase to our customers but this needs some time. When we have new quotations, we will base on the actual situation then and quote.
At the beginning of this year, a lot of workers went back for the Chinese New Year. We had to spend money to get workers to join us or give them incentive not to go back.
We have also been preparing for a ramp-up and had to train workers, so there was an increase in labour costs. My CFO, Samuel, can give you some figures.
Samuel Yuen: In 2Q, year on year, labour cost has gone up about 20%. The headcount increase was also about 20%.
Q: Do you expect wages to increase in the current quarter?
A: As we get into the ramp stage, the situation will stabilize. We may increase headcount by another 10-20% in 3Q.
Q: For the strong ramp-up in this quarter, what are the products and are you getting new clients?
A: The ramp-up will be for existing accounts, and the products are across the segments, particularly wireless and CE (consumer electronics). There are new products and there is also seasonal increase in demand.
Q: What was your production capacity utilization in 2Q? What do you expect it to be in 2H?
A: Less than 50% in 2Q. In 3Q and 4Q, we expect it to be more than 70%.
Hi-P's powerpoint presentation is available at the SGX website.
Recent story: INSIDER BUYING: HI-P, FRENCKEN, LIZHONG WHEEL, etc
