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Ngai Hing Hong turns around first-half loss

By: Steve Toloken

October 8, 2012

HONG KONG (Oct. 8, 1:20 p.m. ET) — Tighter cost controls and a rebound in its colorants and compounding business allowed Hong Kong-based materials supplier Ngai Hing Hong Co. Ltd. to turn a slight profit for its most recent fiscal year, reversing losses in the first half of the year.

Poor global economic conditions and rising labor and finance costs in China continued to hold the firm back, but it said it had success building business with new international customers in the automotive and electronics industries and in replacing stone and wood with plastic-based materials in mainland China.

Revenues for the year ending June 30 were HK$1.64 billion (US$210.2 million), down 3 percent from the previous fiscal year, but it recorded a small profit for the year of about HK$3.1 million (US$397,000), reversing a loss of about HK$8.2 million (US$1.05 million) in the first six months, the company said in a Sept. 21 earnings filing with the Hong Kong stock market.

“The Group bolstered cost control and adjusted its business strategies, which resulted in improved business performance in the second half year,” the company said.

Ngai Hing Hong said it expected results to improve in the current fiscal year in part because its profitability was held back by higher costs related to relocating to a new factory in Hong Kong and expanding capacity in plastics compounding at its Shanghai plant, which added two production lines and started receiving orders in July.

“The new plants in Shanghai and Hong Kong will not only position the Group more clearly in the Southern and Eastern China markets, but will also complement its production model and create synergies for its business,” it said. “The management expects the expanded production capacity will strengthen the Group’s competitive advantage and achieve greater cost efficiency.”

It said its Shanghai factory was able to make gains securing business from well-known automobile brands, and it said it hoped other offices in China could replicate its Shanghai business model.

The company said it would continue its focus on the domestic China market, and said its colorants and plastic compounding business unit was able to secure more business in the food packaging industry, including becoming the preferred supplier for some customers, and grow its turnover 16 percent, to HK$360.6 million (US$46.2 million).