Foxconn International Holdings Ltd, the handset manufacturing unit of the world's biggest contract electronics maker, said the sale of excess facilities and termination of unprofitable operations will help the company post a "dramatic improvement" in its financial results this year.

Foxconn plans to consolidate sites in Beijing, Langfang and Tianjin on the mainland and will sell a facility in Taiyuan to its parent, Chief Executive Officer Samuel Chin said after the company's annual general meeting in Hong Kong Wednesday. Foxconn will also diversify by adding new customers, while expanding relationships with companies including Huawei Technologies Co.

"Profitability, profitability, profitability: that's our drive," Chin said at a press briefing. He declined to estimate when the company will return to profit.

Foxconn International had a net loss of $218.3 million last year, compared with a profit of $38.6 million in 2009, as its main customer Nokia Oyj failed to keep pace with competitors including Apple Inc and HTC Corp in the market for smartphones. The contract manufacturer, a unit of Taiwan billionaire Terry Guo Tai-ming's Hon Hai Precision Industry Co, will be dropped from Hang Seng Index next month after its stock declined 34 percent in the past year.

"The company's business is still highly geared to Nokia's," Bonnie Chang, who rates Foxconn International shares "hold" at Yuanta Securities in Hong Kong, said Tuesday. The contract manufacturer derived more than 40 percent of its sales from Nokia last year, she said.

Foxconn International shares jumped nearly 11 percent to close at HK$4.35 in Hong Kong on Wednesday. The stock will be excluded from the Hang Seng Index from June 7.

In February, Nokia reached an agreement to adopt Microsoft's Windows Phone 7 as its main operating system, after losing market share to Apple and companies that make smartphones based on Google Inc's Android system. Foxconn will continue to build its relationship with Nokia, Chin said.

"We will support Nokia to get back, improve their stature and win greater market share," he said.

Hon Hai, based in Taipei, is the main supplier of Apple's iPhone and iPad tablet computer.

Foxconn International and other Hon Hai companies raised wages for workers at their main manufacturing site in Shenzhen after a spate of employee suicides last year. Production is being moved to central and western Chinese regions such as Wuhan and Chongqing to mitigate rising labor costs.

Bloomberg

(HK Edition 05/19/2011 page3)