Hong Kong plastic toy maker Lung Cheong expands in Indonesia

By Steve Toloken
News Editor / International

Published: June 26, 2013 12:47 pm ET
Updated: June 26, 2013 12:50 pm ET

Related to this story

Topics Asia, China, Toys

Hong Kong plastic toy maker Lung Cheong International Holdings Ltd. is hoping that building another factory in Indonesia and pulling manufacturing away from increasingly expensive Chinese factories can help it boost profitability in a weak global market.

The company, which sold its China factories in 2011 and moved production to its campus in Serang, Indonesia, said in a July 25 report to the Hong Kong Stock Exchange that it has started construction of another factory that will double its capacity there.

The expansion in Indonesia will help it reduce reliance on mainland China and the rapidly rising labor costs there, the company said, as it searches for other acquisitions and new lines of business.

“The group’s production base in Indonesia currently enjoys favorable advantages over [China] with plentiful supply of labor,” it said. “The group looks forward to optimistic growth in our Indonesian plant…. Management remains confident in the group’s ability to seize this unique opportunity to consolidate its market position amid the exit of weaker players.”

It told the Hong Kong stock market it would spend HK$75 million (US$$9.66 million) on the new Indonesian factory and other upgrades, and said the new plant would be finished late this year or early 2014.

Still, it specifically cautioned that it needs to focus on making the Indonesian operations more efficient, suggesting that for the country’s lower-cost benefits, challenges remain. It noted that wages are also rising in Indonesia.

As part of a broader diversification strategy, Lung Cheong sold 25 percent of itself earlier this year to an investment company owned by Chinese appliance giant Haier Group for HK$278 million (US$35.9 million), and said it hoped to tap into Haier’s expertise in brand building and distribution. It had previously announced the Haier investment.

In a late May filing to the Hong Kong exchange, it disclosed that it plans to use HK$150 million (US$19.33 million) for additional acquisitions and HK$60 million (US$7.73 million) for acquiring new product lines in unspecified “high technology” industries.

“The directors are concerned that the global toy industry will continue to face challenges in the future which would adversely affect the group’s financial performance,” it said. “The directors will actively conduct [a] strategic review of the group’s direction and seek possible acquisition opportunities which can complement the Group’s existing business and the future strategic direction.”

It said its export-dependent toy business has been hurt by slackness in major markets in North America and Europe, which accounts for more than 80 percent of revenues, and said most of its sales in the year ending March 31 were for less complex, lower-priced toys.

“The group has continued its efforts into developing relationships with customers which had strong electronic and plastic toy lines targeted at the lower-priced segment,” it said. “Fewer sales of premium priced items were mainly due to economic uncertainties affecting consumers worldwide.”

The company makes toy race cars, electronic and plastic toys and consumer electronics, and it generates more than half its sales from its own-branded products, including toys under the “Kid Galaxy” name.

Besides the Indonesian factory, it said it has a marketing and toy design office in the United States.

For the year ending March 31, the company said sales were HK$209 million (US$26.9 million), a sharp drop from HK$420 million (US$54.1 million) in its 2011-2012 year. In the same period, profit fell from HK$78 million (US$10.1 million) in the 2011/2012 year to HK$2 million (US$257,000) in the most recent fiscal year.

But the earlier year figures included revenues from assets that were subsequently sold off, and the earlier year profit of HK$78 million came from a one-time gain from selling factories in China, making it hard to directly compare the two years’ financials.


Comments

Hong Kong plastic toy maker Lung Cheong expands in Indonesia

By Steve Toloken
News Editor / International

Published: June 26, 2013 12:47 pm ET
Updated: June 26, 2013 12:50 pm ET

Post Your Comments


Back to story


More stories

Image

Fatalities reported in fire at Bangladesh factory

January 31, 2015 2:43 pm ET

At least a dozen people were reportedly killed in a fire that raced through a plastics factory in Bangladesh’s capital of Dhaka Saturday, with...    More

Image

US loses top investment destination spot to China

January 30, 2015 11:14 am ET

China has overtaken the United States as the leading global destination for foreign direct investment, according to a new report.    More

Image

China to lead the way on robots

January 30, 2015 11:12 am ET

More industrial robots will be operating in China’s production plants than in the European Union or North America by 2017.    More

Image

DuPont-Chenguang JV to produce fluoroelastomers in China

January 29, 2015 12:30 pm ET

DuPont Fluoropolymer Solutions and Zhonghao Chenguang Chemical Research Institute Co. Ltd. are proceeding with a 50-50 joint venture to serve the...    More

Image

China XD to catch up on Sichuan project

January 28, 2015 2:41 pm ET

Automotive compounder China XD Plastics Co. Ltd. (Nasdaq: CXDC) has been working on its fourth production base in Nanchong, Sichuan province since 201...    More

Market Reports

Plastics in Automotive: Innovation & Emerging Trends

This special report newly released by PN and sponsored by The Conair Group examines current trends in the use of plastics in automotive, materials innovations and the changing landscape. It includes a review of legislative/regulatory activity impacting vehicle development and lightweighting, market opportunities & challenges for mold and toolmakers, innovative design strategies being implemented by major OEMs and suppliers, as well as a review of key indicators in Canada, Mexico, Brazil and China.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Injection Molding Market Analysis & Processor Rankings

Plastics News BUNDLED package contains our in-depth Market Analysis of the Injection Molding segment. You will gain keen insight on current trends and our economic outlook.

As a BONUS this includes PN's updated 2014 database of North American Injection Molders RANKED by sales volume. Sort, merge, mail & prospect by end market, materials processed, region, # of plants and more.

Learn more

Upcoming Plastics News Events

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events