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China's Cosmos shuts factory, but eyes rebound

By: Steve Toloken

August 29, 2012

HONG KONG (Aug. 29, 10:30 a.m. ET) — Broad-based Chinese plastics firm Cosmos Machinery Enterprises Ltd. has closed an appliance and electronics molding factory in Wuxi, China, as tougher economic conditions sharply cut sales and pushed the company into a small loss in the first half of the year.

The Hong Kong-based company, which has diverse units that make injection molding and extrusion equipment, mold plastic products and manufacture printed circuit boards, saw its overall sales drop 21 percent to HK$1 billion (US$128.9 million) on a loss of HK$2.49 million (US$321,000).

But the company told the Hong Kong stock market that while the market remains uncertain it’s hopeful of a rebound in the second half, as new product development and cost controls begin to show results and looser monetary policy in China brings more growth to some industries.

“The board of directors is confident that all businesses of the group will recover from the adversity soon,” it said.

The company disclosed in the filing that it decided in early 2012 to close its plastics processing factory in Wuxi and focus those resources on a new plant nearby in Hefei, Anhui province, which is designed to take advantage of Hefei’s growth as a center of manufacturing household appliances.

It said that while it’s been hurt by a weaker household appliance market in China, it expected business in Hefei to be “greatly improved” in the second half as the market picks up and it can take advantage of efficiencies in the new facility.

Its plastics processing unit saw sales drop 41 percent in the first half of the year, to HK$152.2 million (US$19.6 million).

But the company said some parts of its processing business did well, including food packaging, cutlery and containers with in-mold labeling. Exports of disposable cutlery to Japan in particular increased.

The company is also one of China’s larger makers of injection molding machines, and plastic equipment is its largest single business unit, accounting for about 45 percent of total sales.

That unit fared better than plastic products, although its sales were still down 22 percent to HK$450 million (US$58.1 million). It posted a small profit of HK$10.5 million (US$1.35 million).

The debt crisis in Europe and a slowdown in China “depressed” investment in equipment and some customers delayed orders because of financing difficulties, Cosmos said.

“The oversupply of general injection molding machines in the market exacerbated the vicious competition, which also extended to servo-drive energy-saving injection molding machines,” it said.

The firm said it was hopeful new product development would boost sales, including a new U(J) Se series of ultra-large shot injection machines up to 4,000 metric tons clamping force, aimed at infrastructure markets like pipe fittings and manhole covers.

It also said it developed a new electric-hybrid machine, the Greenline 98, that is the first electric press to pass China’s GB 22530-2008 safety standard for rubber and plastics injection molding machines.

It said the machine is China’s first servo-driven hybrid with kinetic pressurized clamping, which saves on replacing screw assemblies and is 20 percent faster than other machines in its class.

“Although the group is confident that the machinery manufacturing business will be able to improve performance by properly adjusting the product mix, the group is relatively prudent about its future results performance due to more uncertainties for the surrounding economies,” it said.