Globetronics feels the heat
GEORGE TOWN - Globetronics Technology Bhd, which lost 405 million ringgit of its market value over the first two days of this week and reported a massive 78.5 per cent dip in its first quarter profits, has laid blame on the twin effects of declining smart
Group chief executive officer Datuk Heng Huck Lee said that orders for the core sensor products of the group had dropped substantially in the first quarter.
“The strengthened ringgit also eroded our margins,” he said, declining to name any specific product or customer name.
The smartphone segment contributed 45 per cent to 50 per cent of Globetronics’ revenue for 2015.
Notably, Apple is expected to announce a slide in total revenue, the first time in 13 years, along with a slump in iPhone sales for the second quarter ended March 31, 2016.
As of press time, consensus estimates were for Apple to sell about 51 million iPhones in the three months ended March. This would be down from 61.2 million units in the March quarter of 2015.
For its first quarter ended March 31, 2016, Globetronics posted a net profit of RM3.6mil on the back of RM58.7mil turnover, compared to RM17mil and RM88.6mil in the previous year’s corresponding period.
Earnings per share dropped to 1.31 sen from 6.1 sen previously. It declared an interim dividend of 14 sen.
“The lower revenue and net profit achieved in the quarter was mainly due to lower volume loadings from some of the group’s customers as a result of reduction in end customers’ demand and forex loss of RM4.6mil,” said Globetronics in a filing with Bursa.
On its prospects moving forward, Globetronics said it expected to see soft volume loadings from some of the group’s customers in the second quarter as a result of reduction in end customers’ demand and general slowdown in the industry.
Globetronics said it would continue to focus on escalating up the value chain and riding on the research and development initiatives in new products design and development with its key customers.
According to Heng, there were also requests from customers to reduce selling prices.
“The more than 30 per cent drop in revenue is in line with the group’s projection for the first quarter.
“However, we did not make a similar projection for the drop in net profit of about 80 per cent as we could not ascertain the ringgit’s volatility,” he added.
Globetronics’ performance is quite in line with the projection for the smartphone industry by research firms such as the Connecticut-based research house Gartner, according to Heng.
The Gartner report projects global smartphone sales would reach 1.5 billion units in 2016, a 7 per cent growth from 2015.
The report says global smartphone sales will, for the first time, exhibit single-digit growth in 2016.
“The double-digit growth era for the global smartphone market has come to an end.
“Historically, worsening economic conditions had negligible impact on smartphone sales and spend, but this is no longer the case.
“China and North America smartphone sales are on pace to be flat in 2016, exhibiting 0.7 per cent and 0.4 per cent growth,” said Gartner research director Ranjit Atwal in that report.
On Globetronic’s recent share price drop Heng said: “We are not sure whether this is a reaction to the quarterly results or to the slowdown in the smartphone market,” he said.
Moving forward, Heng said Globetronics would introduce three new sensor products for its existing customers.
“These sensors would be used in smart phones and smart devices of the mid-range and premium categories, which will be released in the late second quarter or early third quarter of 2016.
“Hopefully, these new products would help the group to deliver improved results for the second half compared with the first half,” he added.
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