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Hong Kong's Ngai Hing Hong sees recovery continue

By: Steve Toloken

February 26, 2013

HONG KONG -- Hong Kong compounder Ngai Hing Hong Co. Ltd. said a continued shift away from exports and toward the mainland China market, along with some recovery in the United States, pushed sales up 12 percent in the second half of 2012.

Sales rose to HK$923.9 million (US$119.0 million), with the company reporting a small profit of HK$5.9 million (US$760,000) in the period, allowing a modest recovery it said began in the first half of 2012 to continue. It remained troubled by weak sales in Europe and general economic uncertainty, though.

''The global economy was still clouded by uncertainties,'' the company said in a Feb. 25 filing to the Hong Kong Stock Exchange. ''However, the group's well-planned market expansion coupled with a strict cost control strategy enabled the improvement in business performance to continue.''

Driving the improvement, the company said, was growth in the mainland Chinese market. China accounted for 46 percent of sales in the second half of 2012, a sizable jump compared with 39 percent in the second half of 2011.

The company said it continued investments there. It bought office space in Chongqing in December, replacing leased space and becoming headquarters for its push into Western China and the heavy industry base there.

''Spurred by the Chinese Central Government's policy to stimulate domestic consumption, the group has managed to further expand its market in Mainland China,'' the company said. ''The group will continue to focus there, with the aim to lift the proportion of its total revenue from China to 50 percent.''

Broken down by specific business, the company's colorants, pigments and plastic compounding business performed best, growing 21 percent in sales to HK$211.6 million (US$27.3 million), particularly in East China, led by demand in packaging, automotive and an emerging personal healthcare business.

Its engineering plastics business struggled, with sales down 13 percent to HK$105.6 million (US$13.6 million), on weakness in export markets in the United States and Europe. But it said the unit remained profitable.

And its plastics trading business saw sales rise 14 percent to HK$605.4 million (US$78.0 million), although the company said that business had not recovered enough from the global slowdown to become profitable.

Globally, it suggested that markets were mixed, with slowness in Europe and North American hurting some business. Beyond the positive effects it said it saw from the Chinese government's policies to stimulate domestic demand, it said additional quantitative easing by the United States was helping in the short-term.

''In the overseas markets, the introduction of the third round of quantitative easing by the U.S. government had a positive impact on the global economy, particularly the US market,'' the company said. ''The peak holiday sales season from U.S. Thanksgiving Day to Christmas has also driven demand from the export market for products of certain business segments of the group."

Ngai Hing Hong's fiscal year ends June 30.