Electronics Production | August 30, 2007

Hon Hai (Foxconn) shows good results in 1H07

Hon Hai Precision Industry Co., announced its Non-consolidated results for six months ended June 30, 2007.
Capitalizing on the intensifying competition and ever shortening product life cycle that tenaciously persisting in the underlying 6C industry, the Company is pleased to report continued strong growth and the ever apparent synergistic benefits from the renown eCMMS model and the competitive advantages from the ever comprehensive globalize platform.

Comparing the first six months of 2007 with the same period in 2006, net sales surged by 35% to NT$ 510 billion; Net income gained by 32% to NT$ 31.2 billion.

Looking forward, on the competitive advantage front, while steadfastly expanding the eCMMS coverage in mechanical, optical and electrical integration, Company had also kicked off an effort to unearth its huge hidden wealth from intangibles.

On the industry trend front, the Company unwaveringly embracing the age of digital convergence through the unique “Share the Platform" Muster and Alliance initiatives; Company appreciates these expanding groups of worldwide peers who sign onto the grand vision of making comfort of electronic products usage an attainable reality for all mankind. Together with these partners, Company was able to further raised the bar of its legendary ability to support and uncompromising commitment to customers.

"Results for the first half were as expected and we continue to see regular seasonality," said Edmund C.A. Ding, Spokesperson. "Furthermore, we are especially proud with our accomplishments thus far in maximizing our shareholders' value and promote and assure social and environmental responsibility as a priority in a total supply chain initiative. Being a proud member of EICC, we are striving to revolutionize the manufacturing services providing industry again, only this time is to reach for not only the best speed, quality, engineering services, flexibility and cost, but also the best social and environmental responsibility standard to maximize our stakeholders' value at the same time.“

Net Sales: The Company's net sales for 1H07 jumped by 35 % to NT$ 510 billion from NT$ 377 billion for 1H06. Gross Profit (net) and Gross Margin: Due to continual outsize growth in system integration projects, the Company's gross profit (net) for 1H07 exploded by 5.3% to NT$ 26.9 billion from NT$ 21.3 billion for 1H06 even when, as a percentage of net sales, gross profit (net) retreated to 5.3% from 5.7%.

Operating Expenses: The Company's operating expenses for 1H07 increased by 20% to NT$ 10.1 billion from NT$ 8.4 billion for 1H06. As a percentage of net sales, operating expenses further diminished to 2.0% from 2.2% due to Company's increasing superior economy of scale and operational efficiency?

Operating Income and Operating Margin: Principally as a result of the foregoing factors, the Company's operating income for 1H07 rocketed by 30% to NT$ 16.7 billion from NT$12.9 billion for 1H06. As a percentage of net sales, operating income was flat, from 3.4 % to 3.3 %.
Non-Operating Income and Expenses: The Company's non-operating income for 1H07 surged by 30% to NT$ 23.0 billion from NT$ 17.7 billion for 1H06. The increase in non-operating income was principally due to long term investment income from the Company's wholly-owned offshore subsidiaries.

The Company's non-operating expenses for the six months ended June 30, 2007 loomed by 128% to NT$ 2.7 billion from NT$ 1.1 billion for 1H06.

Income Before Income Tax: Principally as a result of the foregoing factors, the Company's income before income tax leaped by 26% to NT$ 37.0 billion for 1H07 from NT$ 29.4 billion for 1H06. As a percentage of net sales, income before income tax shot up to 7.3% from 7.8%.

Net Income and Net Margin: Principally as a result of the foregoing factors, the Company's net income swelled by 32% to NT$ 31.2 billion for 1H07 from NT$ 23.7 billion for 1H06 despite net income decrease to 6.1% from 6.3% as percentage of net sales.
Liquidity and Capital Resources:

During 1H07, Hon Hai's end of period cash and short term investments amount to NT$ 27.4 billion versus NT$ 22.0 billion of same period in 2006. The current period cash consist of outflow of investing activities of NT$ 5.5 billion, and inflow of operating and financing of NT$ 3.5 billion and NT$ 11.5 billion respectively. In comparison, 1H06 end of period cash of inflow of operating activities of NT$ 14.1 billion, and outflow of investing and financing activities of NT$ 3.9 billion and NT$ 810 million respectively.
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