Deswell Industries falls to 52-week low as Q2 profit declines
Shares of Deswell Industries Inc. (Nasdaq: DSWL) are down to a new 52-week low on news before the start of trading of that the maker of injection-molded plastic parts and other electronics saw a decrease in second-quarter earnings.
The net income for the three months ended Sept. 30 was $1.8 million, or $0.11 per share, a decrease of 57.7% compared with a net income of $3.6 million, or $0.24 per share, during the same quarter of 2006. One analyst polled by Thomson Financial was expecting the Macao, China-based company to report a profit of $0.17 per share.
Net sales increased 7.6% to $38.4 million, from $35.7 million during the third quarter of 2006, but fell short of the projected $40 million.
“While we saw modest overall revenue improvement, margins continue to be impacted by high raw material and component costs, increasing labor rates and the increased value of the Chinese renminbi,” said CEO Franki Tse in a statement.
Tse also attributed the profit decline to higher value added tax rates imposed by the Chinese government on certain export products.
Deswell Industries’ total gross margin decreased to 17.4% from 24.8% in the same quarter a year earlier, a decline the company blamed on a change in customer and product mix and a rise in labor and overhead costs.
“To help absorb the higher costs, we recently initiated price increases across our business,” said Tse. “We also expect a slight headcount reduction in the upcoming quarter.”
At 1:41 p.m. ET, shares of Deswell Industries (DSWL) had retreated $1.06, or 24%, to $6.55. The previous 52-week low was $8.53, established on Nov. 9. The 52-week high of $13.04 was reached on June 22.
