Dongguan Tonesun-KY: Minimal Impact from Exchange Rates, New Products Expected to Boost Gross Margin in Second Half

Acoustic ODM manufacturer Dongguan Tonesun-KY (5225-KY) held an investor conference today (18th). Executive Director Zhang Dongyi stated that although revenue and profits have declined, the operating profit margin remains positive, and operational performance is not worse than last year. With the introduction of new products in the second half of the year, gross margin is expected to improve compared to the first half.

Addressing concerns about the revenue decline, Zhang clarified that all of Tonesun's revenue is denominated in USD. However, because the company is listed in Taiwan and reports in TWD, the decline appears larger in TWD terms. He emphasized that this is purely an accounting presentation issue and does not reflect an actual deterioration in operations.

Unlike peers who generally face exchange rate losses, Zhang noted that Tonesun has almost no such losses. He explained that TWD is not a major currency for the company, accounting for less than 1% of usage. The primary payment currencies include USD (over 30%), RMB (over 40%), and VND.

Zhang further elaborated that USD-denominated transactions naturally hedge against USD exposure, while RMB and VND have remained relatively stable this year, with VND even showing a depreciation trend. As a result, exchange rate fluctuations have limited impact on the company.

Regarding the decline in gross margin in Q2, Zhang attributed it to the typical two-year replacement cycle for consumer electronics. New products were originally slated for release in the first half of the year, but customer shipments were delayed due to Trump-era tariffs. However, production of the new products has already begun, and gross margin is expected to rise in the second half.