Foxconn books surprise quarterly profit rise, has conservative outlook for 2024

By Yimou Lee and Sarah Wu

TAIPEI (Reuters) -Apple Inc supplier Foxconn logged a surprise 11% increase in third-quarter profit, helped by gains in non-operating income but reiterated revenue was set to fall slightly for the year.

For 2024, the world’s largest contract electronics maker has a “relatively conservative and neutral” outlook, its chairman, Young Liu, said, adding that expected growth of 5% for the market “could easily be offset by geopolitics.”

Net profit for the July-September quarter came in at T$43.1 billion ($1.3 billion), beating market estimates for an 11% drop and despite a sharp 12% tumble in revenue that was a second straight quarter of decline.

Income from investments in subsidiaries, interest revenue and foreign exchange gains quadrupled during the quarter, the company said.

Liu added that while the Taiwanese company did expect revenue to continue to fall in the important holiday season quarter, its performance was likely to be a bit better than previously expected with the decline slight.

“We have entered the traditional season of hot sales in the second half and our operations are set to gradually improve quarter on quarter,” he told an earnings briefing.

Apple, which in September launched a new series of iPhones, this month gave a sales forecast for the holiday quarter that missed Wall Street expectations, hurt by weak demand for iPads and wearables.

Foxconn said it expects to embark on capital expenditure of more than T$90 billion in 2024 – in line with this year, the bulk of which would be spent on expanding its business in China.

Its electric vehicle business may also benefit from headwinds such as increased competition and rising labour costs in the industry as those factors might push automakers to outsource production, Liu said.

The earnings report comes amid much investor focus on Chinese authorities having opened a tax probe into the company.

Liu said Foxconn’s business in China was operating normally and there had been no outcome from the investigation as yet.

The tax probe was first reported by the state-backed, nationalist Chinese tabloid the Global Times, but in its English version of the story it suggested what China was actually unhappy about was that Foxconn founder Terry Gou is running for president as an independent, a decision he announced in August.

Liu said Foxconn management had to be prepared for all eventualities with regard to Gou’s run for president. Gou is its biggest shareholder, owning 12.6% of the company as of end-June.

Shares of Foxconn closed up 2.4% ahead of the earnings announcement, beating a 0.5% gain for the benchmark index.

($1 = 32.3430 Taiwan dollars)

(Reporting by Yimou Lee and Sarah Wu; Editing by Anne Marie Roantree and Edwina Gibbs)