Hong Kong-based kid's technology maker VTech (0303) reported on Thursday that its net profit for the six months ended 30 September fell 12.9 percent to US$65 million (HK$510 million) due to the increase in cost of sales.
The company maintained the interim dividend at 17 US cents per share.
Revenue rose 5.6 percent to US$1.05 billion, as higher sales in Europe and Asia Pacific offset lower sales in North America and other regions. Europe was VTech's largest market, accounting for 47 percent, followed by North America's 36 percent, the manufacturer said.
However, sales in North America fell 6 percent despite tariffs on the company's US-bound products being lower than a year earlier, as the hit from higher material costs outweighs the tariff benefit, keeping product prices elevated, said Allan Wong, chairman and chief executive of VTech, adding that it has already strived to contain costs.
This dragged gross profit margin down to 30.1 percent from 31.9 percent. Prices of materials rose, especially for some electronic components due to strong demand from the artificial intelligence industry. The rising oil prices caused by the ongoing Middle East conflict pushed up the prices of plastics and freight charges. Appreciation of the yuan also contributed to higher direct labor costs and manufacturing overheads, said Andy Leung, executive director and chief executive of Contract Manufacturing Services at VTech.
Looking ahead, VTech is expected to achieve revenue growth for the full financial year 2027, which is supported by the more stable US tariff situation and positive sales momentum, alongside a pipeline of new telecommunication products being shipped and rolled out globally, said King Pang, executive director and president of VTech.
Gross profit margin, however, is forecast to decline year-on-year as cost of materials and freight charges are expected to remain high, with the factors behind this unchanged, Pang added.
Frank Feng
