British molder Stadium Plastics plc is negotiating to buy a Chinese electronics company to help it to compete in new European markets. The Hong Kong-based firm, with a manufacturing plant nearby on the Chinese mainland and established French and U.K. sales organizations, has limited molding capacity with a dozen small injection presses, said Stadium's finance director, Tim Sale.
"This is more an attacking move to expose ourselves to lots of markets in the U.K. and [continental] Europe where we're not so competitive," he said. The acquisition will benefit Stadium with lower production and labor costs, he added.
The deal was described by group Managing Director Jim Johnson as a strategic step to develop Stadium's electronics division. If concluded, it would be the firm's first venture outside the United Kingdom.
Stadium, of Hartlepool, England, also molds parts for the automotive and consumer products markets.
Stadium has been expanding its electronics division with the 1998 acquisition of the Nottingham, England-based electrical connector and assemblies maker Beales Hunter plc.
The Chinese negotiations were announced as Stadium reported an improved profit of 5.9 million ($9.5 million) on 1999 sales of 89.2 million ($144 million) — up 16 percent over the year before.
But Stadium also has been hit by the crash of two plastics molding customers. Johnson said profit was reduced by 200,000 ($323,400) in the second half of the year as a result of two bad debts.
The firms involved were T&D Industries plc, an insolvent industrial containers and auto parts firm in Bradford, England, that was taken over by receivers PricewaterhouseCoopers in October; and bankrupt automotive and consumer electronics firm TransTec plc of Birmingham, England, taken over by receivers Arthur Andersen in December.
Stadium wrote off more than 100,000 ($161,700) in debt for subcontract custom molding of roadside bins for T&D, while losing a little less than 100,000 owed by TransTec for nonplastics electronics contract work, said Sale.
Stadium also reported taking a 600,000 ($970,000) charge associated with closing two former Beales Hunter plants in England last year, which together employed 100.
Stadium's plastics division has established a firm position as a Tier 2 auto parts supplier, where 1999 sales marginally fell one-half percent after acute pressure and a volume loss in the year's first half. But Stadium is gearing up for the launch of major contracts later this year for Nissan and Rover.