In continued signs of trouble in China's injection molding industry, one of the country's biggest press makers, Chen Hsong Holdings Ltd., has issued a profit warning and expects a considerable decline in turnover leading to a significant decrease in net profit.
Hong Kong-based Chen Hsong issued the profit warning as Hong Kong markets closed March 27, saying the impact of the global financial crisis that began in October continues to hit hard and create an unprecedented, poor business climate.
Customers have become extremely cautious in opening up new factories [and] buying new and replacement machinery, the firm said in the news release.
As a result, the group's order intake has been hard hit.
Chen Hsong has seen a slight improvement in turnover starting in March, but said the visibility of the future market condition remains low.
The company said it has reduced capital expenditures and employed other cost-cutting measures but it is still fiscally healthy.
The group's cash position remains healthy and continues to maintain sufficient working capital so as to capture market share when the economy recovers, Chen Hsong said.
The company issued the profit warning for its current fiscal year, which ends March 31. Chen Hsong typically reports full-year results in July.
In midyear results, before the economic crisis began hurting its business, Chen Hsong reported sales were down 3 percent to HK$1.16 billion (US$150 million), while profits plunged 39 percent to HK$114 million (US$14.71 million).
At that time, Chen Hsong said that its sales in mainland China, the company's largest market, dropped 17 percent, due to higher costs and China's new labor law. But sales in its two other major market segments, Taiwan and overseas, were both up at least 25 percent.
Chen Hsong's other big rival in mainland markets, Haitian International Holdings Ltd. of Ningbo, China, is expected to report calendar 2008 results April 2.