HONG KONG – Top 30 EMS provider Surface Mount Technology (Holdings) Ltd. reported June quarter sales of HK816,843, up 16.1% from a year ago. For its fiscal first quarter, the company’s gross profit was HK105,826, up 3.1%, while earnings were HK15,410, down 27%.

Profits were lower due to higher cost of sales resulting from higher raw material prices, wages, energy cost and depreciation charges, the company said.

“We are seeing a steady stream of new projects. Most of our customers have indicated order growth in the second half of 2007,” SMT said. “As customers are increasingly requiring EMS manufacturers to provide more design services, we are establishing product design and development capability to meet this demand.”
 
Revenue growth was mainly from higher demand for turnkey projects in industrial control and consumer sectors. Gross and net profit margins decreased on a sequential basis from 14.6% to 13% and from 3% to 1.9%, respectively.

For the quarter, cash from operations was HK63,639. Capital investment was HK$70 million, HK$43 million for production equipment. Five new SMT lines were installed in the quarter, and nine more are planned this fiscal year, for a total to 152.

In the June quarter, industrial controls, consumer products and office appliances made up 38%, 10% and 6%, respectively, of revenue, while computer peripheral and telecommunication products were 21% and 3%, respectively, and automotive electronics was 22%.

By region, Japan made up 54% of total revenue, Korea 16%, European and U.S. 20% and other Asian 10%.

At quarter’s end, SMT had HK183,840 in reserves, down 61% year-on-year.
Inventories were 4.8% lower, at HK 298,188.

In June, the firm opened a factory in Changchun, and in July began production on a second factory at TangXia, Dongguan. SMT has also completed the construction on a plant in Suzhou and has begun internal renovation works. Construction of a factory in Tianjin is on schedule, with operations planned to begin in mid 2008.

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