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Electronics Production | October 31, 2008

Foxconn with leap in net sales of 27.4% in first 9 months

Foxconn reports continued strong market share gain, especially from system integration business, due to the ever apparent synergistic benefits to strategic partner customers from the renown eCMMS model and the competitive advantages from the ever comprehensive globalize platform.
"Despite the general uncertainty and a so-called challenging environment, under the back drop of transferring labor intensive process to lower cost area to further increase group’s competitive advantage over the industry, the quarterly unconsolidated results were as expected," said Edmund C.A. Ding, Spokesperson. "Furthermore, we are especially proud with our accomplishments in continued market share gaining of system integration business, which is a clear testimony of industry continual outsourcing trend and our success in providing end-to-end integrated solution to our strategic partner customers. We will continue our mission in maximizing both shareholders’ value by taking more aggressive stand on eliminating idle inventory and tightening account receivables, and in promoting and assuring social and environmental responsibility as a priority in a total supply chain initiative. Being a recognized EICC member, we determine to continue revolutionize the manufacturing services providing industry by not only strive for the best speed, quality, engineering services, efficiency and value-added, but also enforce social and environmental responsibility standard to maximize our stakeholders’ long term value at the same time.“

Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007:
- Net sales leaped 27.4% to NT$ 1.046 trillion
- Gross profit increased 8.5% to NT$ 44.7 billion – gross profit margin eased to 4.3% from 5.0%
- Net income decreased 10.4% to NT$ 45.8 billion – net margin down to 4.4% from 6.2%

Net Sales: The Company’s net sales for the nine months end of September 30, 2008 jumped by 27.4% to NT$ 1.046 trillion from NT$ 821.4 billion for the nine months end of September 30, 2007.

Gross Profit (net) and Gross Margin: Due to intensifying full system outsourcing trend, the Company’s gross profit (net) for the nine months end of September 30, 2008 up 8.5% to NT$ 44.7 billion from NT$ 41.2 billion for the nine months end of September 30, 2007 even when, as a percentage of net sales, gross profit (net) retreated to 4.3% from 5.0%.

Operating Expenses: With the expansion in numbers of footprint set up, the Company’s operating expenses for the nine months end of September 30, 2008 increased by 40.5% to NT$ 22.6 billion from NT$ 16.1 billion for the same period 2007. As a percentage of net sales, operating expenses increased to 2.2% from 2.0%.

Operating Income and Operating Margin: Principally as a result of the foregoing factors, the Company’s operating income for the nine months end of September 30, 2008 decreased by 12.0% to NT$ 22.1 billion from NT$25.1 billion for the nine months end of September 30, 2007. As a percentage of net sales, operating income reduced to 2.1% from 3.1%.

Non-Operating Income and Expenses: The Company’s non-operating income for the nine months end of September 30, 2008 decreased by 5.3% to NT$ 35.7 billion from NT$ 37.8 billion for the same period in 2007.
The Company’s non-operating expenses for the nine months end of September 30, 2008 increased by 18.0% to NT$ 4,080 million from NT$ 3,459 million for the same period in 2007. As a percentage of net sales, non-operating expenses kept the same as 0.4%.

Income Before Income Tax: Principally as a result of the foregoing factors, the Company’s income before income tax decreased by 9.5% to NT$ 53.8 billion for the nine months end of September 30, 2008 from NT$ 59.5 billion for the nine months end of September 30, 2007. As a percentage of net sales, income before income tax decreased to 5.1% from 7.2%.

Net Income and Net Margin: Principally as a result of the foregoing factors, the Company’s net income decreased by 10.4% to NT$ 45.8 billion for the nine months end of September 30, 2008 from NT$ 51.1 billion for the same period in 2007 while net income, as a percentage of net sales, decreased to 4.4% from 6.2%.

Liquidity and Capital Resources: During the nine months end of September 30, 2008, Hon Hai’s end of period cash and short term investments amount to NT$ 10.1 billion versus NT$ 23.7 billion of same period in 2007. The current period cash consist of inflow of operating and financing activities of NT$33.6 billion and NT$ 10.1 billion respectively, and outflow of investing activities of NT$ 37.5 billion. In comparison, the same period in 2007 cash of inflow of operating and financing activities of NT$ 3.3 billion and NT$ 23.7 billion respectively, and outflow of investing activities of NT$ 24.3 billion.

Looking forward, on the competitive advantage front, while steadfastly expanding the eCMMS coverage in mechanical, optical and electrical integration, and leveraging the overall platform’s after sales services and channel synergy, Company had also paced up its on-going effort to transfer its labor intensive processes to lower cost area, Company expects to enjoy expanding competitive advantage over the industry upon completion. On the industry trend front, on top of seeking to broaden its service offering by further expanding its design and software capabilities, Company also expands its unique “Share the Platform” Muster and Alliance program; calling out to ever expanding groups of worldwide peers who embrace the grand vision of making comfort of electronic products usage an attainable reality for all mankind. Together with these partners, Company expects to further raise the bar of its legendary ability to support and uncompromising commitment to customers.

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