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Nam Tai Electronics – Operating Results

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Nam Tai Electronics, Inc. (NYSE: NTE) announced its unaudited results for the fourth quarter ended December 31, 2011.

Operating Results

Net sales in the fourth quarter of 2011 were $145.3 million, down 12.7% from net sales of $166.5 million in the same quarter of 2010. Gross profit of $2.3 million in the fourth quarter of 2011 decreased by 83.8% from $14.2 million in the same quarter last year. Gross profit margin in the fourth quarter of 2011 decreased to 1.6%, down from 8.5% in the fourth quarter of 2010. The gross profit margin decrease was mainly due to three factors. First, changes in our product mix. We have discontinued production of box-built products with higher gross margin, such as Bluetooth headset and calculators. Consistent with our long-term business strategy, the Company is narrowing its focus to higher-growth, lower-margin business opportunities, such as key component assembly for telecommunication products, which leverage the Company’s core strengths. Second, labor costs continues to increase due to year on year wage inflation in China. Currently the monthly labor cost package for 2012 is approximately $1,200, 23% increase from 2011. Furthermore, the depreciation on US dollars against Renminbi also affects our bottom line, as a major portion of the Company’s income is denominated in US dollars. Conversely, our operating costs are mainly denominated in Renminbi. Recent appreciation in Renminbi has increased the cost of sales and operating expenses, and negatively impacted net profits. In addition, in early December 2011, we experienced a labor strike of approximately 1,200 employees due to dissatisfaction with the 23% increase in our wage package for 2012. Accordingly, the Company paid out $2.7 million in lay-off costs for employee severance benefits. Third, startup costs and operating losses at the Company’s facility in Wuxi continued to accrue although our Wuxi facility was completed in 2009 and began manufacturing and assembling flexible printed circuit boards in 2010. We anticipate that LCM project startup cost and operating losses will continue, as we prepare to commence mass production, which we currently anticipate beginning as early as March 2012. Additionally, our FPC business is not yet breakeven and continues to incur losses.


Lower gross margins resulted in an operating loss of $12.5 million in the fourth quarter of 2011, down from operating income of $4.3 million in the fourth quarter of 2010, which includes lay-off costs of $2.7 million and goodwill impairment loss of $3.0 million. Net loss of $5.6 million in the fourth quarter of 2011 compares with net income of $5.3 million in the fourth quarter of 2010, and includes a currency exchange gain of $4.8 million.

For the year ended December 31, 2011, our net sales were $602.3 million, an increase of 12.7% as compared to $534.4 million for the year ended December 31, 2010. The Company’s gross profit margin was 4.7% as compared to 9.6% for 2010. Gross profit was $28.1 million, down 45.2% as compared to $51.3 million last year. Operating loss for 2011 was $11.5 million, compared to operating income of $14.8 million last year. Our net income for 2011 was $0.5 million, or $0.01 per share (diluted), as compared to net income of $15.0 million, or $0.33 per share (diluted), last year.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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