Flextronics International Ltd. reported profits for the fiscal 2014 second quarter shrank as the company faced higher operating costs and on a small decline in gross profit margins. The company said it believes cost-cutting measures introduced earlier in the year would help it improve the total operating structure.
Net income at the top-tier electronics manufacturing services (EMS) provider fell 22 percent, in the three months ended Sept. 27, to $118 million, or 19 cents per share, compared with profits of $150.6 million, or 22 cents per share, in the year-ago quarter. Revenue for the fiscal 2014 second quarter climbed, though, to $6.4 billion from $6.2 billion while gross profit margins fell slightly to 5.75 percent from 5.94 percent. Profits in the year ago quarter benefitted from a $10.5 million charge against interest expenses.
Flextronics’ selling, general and administrative expenses grew in the recently ended quarter to $218.5 million from $192.2 million in the fiscal 2013 second quarter, putting further pressure on its profits.
Like many of its peers, the contract manufacturer is facing sales pressures and predicts in a statement that revenue for the December quarter would be “in the range of $6.5 billion to $6.9 billion,” in line with analysts’ consensus estimate. Flextronics’ management said during a conference call with analysts that they’ve noticed some weakness in the market with manufacturing programs being ramped slowly.
“Many of our customers and suppliers underestimated just how muted the seasonality would ultimately be as evidenced by the earnings reported so far this quarter,” said Michael McNamara, Flextronics’ CEO during the conference call. “We are seeing impacts ranging from more gradual ramps for new programs to some softness in end markets.”