SINGAPORE -- Surface Mount Technology Holdings said its fiscal first-quarter loss narrowed to HK$6.6 million ($850,000) from HK$16.4 million ($2.1 million) last year.

The EMS company reported group sales of HK$650.2 million ($83.7 million), up 49% year-over-year on demand for LED lighting.

For the quarter the gross margin was 9.9%, down from 12.7% last year, the result of a higher level of turnkey business, higher material prices, wages and energy costs.

The company's outlook remains mixed. During the first half, SMT faced a continuing rise in manufacturing costs in China, and saw signs of a slowdown in the global economic recovery by the end of June. Coupled with Europe's debt crisis, high unemployment, cautious consumer confidence and other external factors such as the tightening of fiscal policy of European countries, the recovery is slow, SMT said. "There are concerns of further economic slow down in the third quarter which may extend into the fourth." It said it expects sales to be stable through the rest of its fiscal year.

Industrial controls made up 33% of sales, followed by LED lighting (26%),  computer peripherals (17%), automotive electronics (10%), digital audio/video (8%) and  consumer/others) (6%). Japan is the contract assembler's largest source of revenue, at 59%. 

The relocation of SMT's Suzhou factory has been rescheduled to the end of 2010.