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Chen Hsong hopes two-platen sales offset weakness in emerging markets

By: Steve Toloken

July 8, 2014

Difficulties in China and key emerging markets hurt profits for Hong Kong-based injection press maker Chen Hsong Holding Ltd. in its most recent fiscal year, but the company pointed to positive developments in selling large two-platen machines that helped hold sales steady.

The company, one of China’s largest makers of molding machines, said profit fell 22 percent in its fiscal year ending March 31, to HK$81.4 million (US$10.5 million), while sales grew 3 percent to HK$1.85 billion (US$238.7 million).

“China export growth has long been declining, and the wide-spread currency devaluations of developing countries during this financial year further caused export growth to drop to historical single-digit lows,” Chen Hsong said in a June 25 report to the Hong Kong Stock Exchange. “Even though export growth rebounded somewhat during the second half year, it was still persistently stuck in low territory —an accurate reflection of the increasingly difficult conditions of China’s export sector.”

The struggles were seen across emerging markets: “The currency exchange rates of many such developing countries, such as Brazil, Indonesia, Thailand and India … dropped substantially enough to seriously affect the group’s turnover in international markets.”

But the company pointed to some positives, including the launch of a complete product line of large tonnage two-platen machines manufactured in partnership with Japan’s Mitsubishi Heavy Industries Plastic Technology Co. Ltd., which are expected to contribute significantly to sales this year.

“Due to Mitsubishi’s extremely strict requirements regarding product quality and technical details, the group spent more than two years in cooperation with them to streamline our manufacturing process and to overcome the substantial learning curve and finally succeeded in bulk-production,” Chen Hsong said.

Chen Hsong said it shipped a 6,500 ton press to a customer in the Middle East in the fiscal year, and said it was the largest plastic molding machine yet manufactured in Asia.

The company also said sales for its manufacturing plant in Taiwan rose 27 percent to HK$145 million (US$18.7 million), as that unit saw rising sales to Europe and the United States. It said saw some encouraging signs among its newly established sales subsidiaries overseas, with sales in Europe rising 50 percent.

Chen Hsong said the current economic outlook is “full of uncertainties,” with China stuck in a period of adjustment and Europe showing signs of weakness as the European Central Bank became the first central bank in the world to adopt a negative interest rate policy.

“These uncertain factors raise the group’s concerns regarding the coming year, which is expected to be extremely difficult and challenging,” it said. “The group believes, however, that it can continue to reap healthy growth from a number of promising markets through its investments in international markets and the launch of new products and new technology.”