Foxconn parent posts weak Q1 profit on employment costs

Hon Hai Precision says that while it generated a sizable profit during the first quarter, increased expenses for employment costs cut into an otherwise strong period.

Foxconn parent company Hon Hai Precision Industry mustered a sizable profit during the first quarter, but its gains were tempered by rising employment costs.

During the first quarter, Hon Hai generated a profit of NT$14.9 (about $510 million), up slightly from the NT$14.4 billion profit it posted during the first quarter of 2011. According to Dow Jones Newswires, which polled eight analysts who profile Hon Hai, the profit was well below consensus of NT$22.1 billion in earnings.

Hon Hai's profit margin slid from 7.25 percent last year to 4 percent this year. During the fourth quarter, the company's margin hit 8.9 percent. The decline was due mainly to rising employment costs associated with a Fair Labor Association (FLA) audit of Foxconn facilities.

In March, the Fair Labor Association, which was brought in by Apple to ensure Foxconn was adhering to its standards on working conditions, found that the manufacturer had many employees working more than 60 hours of weekly overtime. In addition, 60 percent of Foxconn workers at three facilities said that they weren't being paid enough to "meet their basic needs." In response, Foxconn agreed to increase pay and reduce working hours . The company is also hiring new employees to handle the workload.

Still, not all employees are too pleased with that. Speaking with Reuters last month, several Foxconn employees said that they want to work more hours so they can increase their pay . That followed an FLA survey that found that 48 percent of Foxconn's employees described their workloads as reasonable, while more than one-third of respondents said that they'd like to work additional hours to make more money. Only 17.7 percent of the workers were interested in working less.

About the author

Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.

 

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