Merry Q2 Non-Operating Gains Boost Net Profit to NT$120 Million, Down 51% YoY, EPS NT$0.5; Optimistic About Q3 Peak Season Driving Revenue

Acoustic component manufacturer Merry (2439-TW) held its earnings call today (31) and released its second-quarter financial report. Due to the consolidation of its Japanese group and employee bonuses, operating profit declined 98% quarter-on-quarter. Second-quarter net profit reached NT$120 million, down 51.9% QoQ but up 4,033.3% YoY, with earnings per share (EPS) at NT$0.5. CEO Huang Chao-feng stated that Q3 will enter the traditional peak season, and revenue is expected to significantly outperform Q2.

Merry's Q2 revenue reached NT$10.44 billion, down 4.9% QoQ but up 1.1% YoY. Gross margin was 10.0%, down 1.8 percentage points QoQ and 1.7 percentage points YoY. Operating profit was NT$4 million, down 98.1% QoQ and 98.4% YoY. Operating margin was 0%, down 1.9 percentage points QoQ and 2.3 percentage points YoY. Net profit was NT$120 million, with EPS at NT$0.5.

Merry's first-half cumulative revenue reached NT$21.41 billion, up 11.6% YoY. Gross margin was 10.9%, down 1.1 percentage points YoY. Operating profit was NT$210 million, down 39.4% YoY. Operating margin was 1%, down 0.8 percentage points YoY. Net profit was NT$380 million, up 7.3% YoY, with EPS at NT$1.54.

Regarding the pressure on gross margin and the sharp decline in operating profit, CEO Huang Chao-feng explained that changes in product mix, unstable initial margins for new products, rising material costs, and RMB appreciation contributed to lower gross profit. Additionally, operating expenses rose to NT$1.038 billion due to employee bonuses and the consolidation of the Japanese group, resulting in a 98% YoY decline in operating profit.

Huang mentioned that exchange gains from fluctuations in the USD, THB, and RMB increased non-operating income to NT$160 million in Q2, up 280.2% YoY, boosting overall profitability.

Looking ahead to Q3 operations, Huang expects Merry to enter the traditional peak season, with overall revenue significantly outperforming Q2. Overall headphone revenue is expected to remain flat YoY, while smartphone speaker and Bluetooth speaker shipments will rise simultaneously. Battery products will benefit from new project mass production, achieving double-digit revenue growth.

In response to cost challenges, Huang stated that rising crude oil prices have driven up petrochemical material costs, and AI demand has caused shortages and price hikes in electronic passive components, posing challenges to full-year profitability. The company is actively pursuing material substitution, supplier negotiations, and improving overseas plant utilization and production efficiency to enhance profitability and corporate resilience.

Regarding equity investments and capacity deployment, the China plant's profit recognition in Q2 decreased compared to Q1 due to RMB appreciation, rising plastic component costs, and increased new project development expenses. The Vietnam plant accounts for approximately 25% of group revenue, with post-tax net profit margins maintaining a stable level of 8.5% to 8.7%.