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New tax rates, other factors take bite out of Giant's profits

Published May 15, 2018

TAICHUNG, Taiwan (BRAIN) — Giant Manufacturing's first-quarter earnings report offers a look at how the e-bike market is changing the look of the bicycle industry.

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Premium e-bike sales drove Giant's growth in the first quarter, accounting for more than 30 percent of its quarterly revenue.

The uptick in e-bike orders led to a 3.2 percent increase in revenue to $466.5 million compared with last year's first quarter.

However, on the downside, net income before taxes slumped 17 percent to $19.3 million.

Adding to the company's financial burden were new Taiwanese tax rates that took a bite out of the company's net after-tax income — down 50 percent when compared year-over-year.

According to Giant, Taiwan's tax rates for corporations increased from 17 percent to 20 percent, clipping net after-tax income by an additional $4.9 million.

"If (we) exclude the income tax effect, first-quarter net income after taxes would have declined (only) 22 percent," a release stated.

However, Giant cited multiple factors that contributed to its overall weakness in the first quarter: an unfavorable exchange rate with China's renminbi (RMB), a squeeze on OEM margins, continued softness in China's domestic market, as well as the hit it took from the new tax rates.

In addition, first-quarter sales in the U.S. and Japan were weak thanks to a prolonged spate of poor weather. While Giant noted the continued weakness in the Chinese market, it did point out that premium carbon fiber product sales were up.

Despite a soft first quarter, Giant said the company continues to benefit from double-digit growth in e-bike sales. And the company remains bullish on e-bike and performance bike sales in Europe and North America, Giant stated.

 

Topics associated with this article: Earnings/Financial Reports

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