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Foxconn Parent’s Q1 Profit Weakened By Employment Costs

Hon Hai Precision, the parent company of Foxconn, notched up a reasonable profit in the first quarter of the year, but those takings were cut into by rising employment costs.

Hon Hai's Q1 profit hit NT$14.9 billion, around £314 million, which was up slightly year-on-year from NT$14.4 billion. However, that figure was below analyst expectations, with a poll of eight analysts indicating that profit should have been up at the NT$21 billion level.

The company's profit margin dropped from 7.25 per cent in Q1 2011, to 4 per cent this year - and the margin was actually up touching 9 per cent at the end of last year. The slide was put down to increased employment expenses, following the Fair Labour Association audit of Foxconn factories.

Foxconn, which has some 1.2 million employees, manufactures gadgets for big tech companies, most notably Apple, but there has been controversy over working conditions and wages at Foxconn factories of late.

As we reported at the end of March, Foxconn was found to have committed over 50 breaches of labour related laws, concerning employees working too much overtime, with risk of injury or death due to exhaustion, and low monthly wages.

Addressing these wage and overtime issues has obviously been expensive, but necessary.

Source: CNET