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Haitian says revenue down, but company presses ahead with new factory

By: Steve Toloken

March 27, 2013

HONG KONG — A slower Chinese economy in 2012 pushed revenues for injection molding machine maker Haitian International Holdings Ltd. down 10 percent, although the company said exports held steady and sales from its more advanced machines grew.

The Ningbo, Zhejiang-based company, which is China's largest injection molding machine maker, said in a March 26 report to the Hong Kong stock market that revenues for the year dropped to 6.33 billion Chinese yuan (US$1.01 billion), from 7.02 billion yuan ($1.12 billion) in 2011.

Still, the company said it was satisfied that it maintained its profit margins even with the falling sales, and it disclosed that it started constructing a sizable new factory in Ningbo, a 200,000 square meter facility to enlarge its capacity for making all-electric presses.

"Last year was a real difficult year in China," said Haitian Executive Director Helmar Franz, in a March 27 interview in Hong Kong.

The entire drop in sales was concentrated within China, where revenue fell 13.87 percent to 4.19 billion yuan ($672.5 million), while exports held steady at about 1.99 billion yuan ($319.4 million). Haitian believes the market stabilized towards the end of 2012 and expects China to launch a series of economic stimulus plans now that new leaders are in place.

Its biggest gain in exports came in North America, where revenues doubled from 125 million yuan ($20 million) in 2011 to 256 million yuan ($41.09 million) in 2012.

The region, which for Haitian includes Canada, the United States and Mexico, still trails Europe, Southeast Asia and South America as export destinations and is not a large market for Haitian. But it is growing quickly as manufacturing costs in China rise, Franz said.

"For us, at the moment a lot of business returns to North America, not only to the United States but to Mexico," he said. These are customers, he said, "which used to operate in China, but they move back to Mexico."

Franz said the company was able to maintain profit margins because of a focus on lean manufacturing and operational efficiency, which he maintains allowed it to handle the difficult economic environment better than Chinese industry peers and maintain its net profit margin at 15.9 percent.

Haitian reported profit for the year of 986 million yuan ($158.2 million), a drop of 10.7 percent from 2011.

Franz said the company increased sales of its more technologically advanced products, its Venus all-electric series, its Jupiter two-platen models and its IA series of multi-color molding machines.

Venus sales rose 14.2 percent to 348.6 million yuan ($55.9 million), Jupiter sales rose 10.8 percent to 273.9 million yuan ($43.9 million) and the IA series rose 42 percent to 186.6 million ($29.5 million).

Franz also said the company planned to focus this year on Africa. It won't become a major market for the firm, but he said it will be the focus of significant investigation in 2013.

"I strongly believe it is underestimated," he said. "Our top salespeople are investigating. They will travel and report to me.

"It is a market of course that is not interesting for Engel or Krauss-Maffei because nobody needs the sophisticated machines there, but we have the others, we would be able to supply machines at a low cost," he said.

Franz said the company's new Ningbo factory, in the city's Chunxiao development zone, will open in 2014. Details are being worked out, but it will be designed to handle what Haitian believes will be a sizable shift toward all-electric presses.

"It will not be 10 or 15 percent [increase in capacity for electrics], it will double or more," Franz said.

"We believe that all machines at a certain point in time, maybe five years, six years, or seven years, whenever, all machines below 500 tonnes [of clamping force] will be all-electric and all machines over 500 tonnes will be two platen," he said, although he later softened on the time frame.

"It depends on how electric machines will develop. Electrical principles need to end up in machines much simpler and much cheaper. This we are working on also," he said.