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Nam Tai Reports 104% Net Sales Growth for 1Q11
May 9, 2011 | PR NewswireEstimated reading time: 2 minutes
Nam Tai Electronics Inc. has reported net sales of $161.9 million for the first quarter of 2011, up 104% from 1Q10’s $79.27 million. Although gross profit improved by 26% to $8.22 million, gross profit margin in 1Q11 decreased to 5.1%, down from 8.2% in the first quarter of 2010, mainly due to three reasons: Discontinued box built products with higher gross margin such as Bluetooth headset and calculators; increased labor cost; and startup costs. In particular, operating losses at the company's facility in Wuxi completed in 2009 continued although the Wuxi site began manufacture and assembly of flexible printed circuit boards (FPCBs) in 2010. Nevertheless, due to increased sales, the company earned net income of $2 million, compared with the loss of $1.1 million for the first quarter of last year.
By the time the earthquake occurred in Japan on March 11, 2011, the company had received most materials required to support March sales. So the impact of the earthquake disaster on first quarter sales revenue was small.
Expansion Projects Currently, Nam Tai has two separate projects planned for expansion, both of which depend upon prompt action and cooperation of local PRC government.
Following the report in the fourth quarter 2010, the raw land in Guangming Hi-Tech Industrial Park, Shenzhen, approximately 30 minutes driving distance from its existing facilities in Gushu, Shenzhen and approximately one hour driving distance from Hong Kong, has not yet been delivered to the company. The local Government has not indicated when the land will be released, but the company continues to pursue the project.
The company's second expansion project involves acquisition of land use rights for approximately 500,000 square feet of raw land adjacent to the company's operational manufacturing facility in Wuxi in order to construct structures, such as dormitories, canteen, labor activity center, research laboratory, and testing and training centers, to support operations at the Wuxi manufacturing facility.
Outlook
The Japanese earthquake is expected to affect the performance of the company this year. Nam Tai produces mainly LCD modules and telecommunications subassemblies for Japanese multinational corporations (MNCs). Key components are manufactured in Japan, and shortages of those components could unfavorably impact revenues in the coming quarters. Most recent inputs from key component suppliers suggest an impact of up to 20% of the company's performance. The situation remains unstable and the extent of the damage to the supply chain is still unclear.
Nam Tai is working with suppliers and customers to qualify alternate materials and sourcing to stabilize the situation and to reduce exposure to component shortages in a long term. It is anticipated the situation will be clearer towards the end of second quarter or earlier. The company will release updates on this situation as additional information becomes available.
Although the earthquake in Japan has impacted some electronic materials and component supplies, long term global demand has generally not decreased. Nam Tai continues to expand manufacturing capacity significantly to meet growing demand for LCD modules for applications in market segments of telecommunications, such as smart phones and tablets. Nam Tai is also actively pursuing new product segments within core capabilities and developing new customer bases outside of Japan.