Domestic Chinese demand is proving to be the one bright spot, albeit a big one, for one of the country's largest injection press makers, Hong Kong-based Chen Hsong Holdings Ltd.
Continued uncertainty in the global economy clouds the firm's broader outlook.
Rising demand in China single-handedly pushed up earnings 13 percent to HK$1.8 billion (US$231.7 million) for the fiscal year ended March 31, the company said in a July 15 announcement to the Hong Kong stock market. Exports, however, nose-dived.
“Visibility continues to be low for the world economy during the next fiscal year [i.e. 2010/2011], with equal prospects for negative as well as positive developments,” the company said in its annual report.
“On the positive side, China will continue to grow in a steady but relatively rapid pace, targeting a healthy [gross domestic product] growth of over 8 percent,” Chen Hsong said. “On the negative side, a multitude of economic indicators all point to a general lack of resiliency in the U.S. economic recovery [and] the European Union continues to be plagued by sovereign debt crises.”
Chen Hsong does about three-fourths of its business in mainland China and Hong Kong, and saw sales there rise 39 percent in the fiscal year, to HK$1.35 billion (US$173.8 million), with growth dominated by “government-encouraged” industries benefiting from government stimulus spending, in areas like cars and appliances.
But it said sales to the group's export-oriented customers “continued to be depressed,” and said its own sales to overseas markets were down 22 percent to HK$338 million (US$43.5 million), and down 42 percent to Taiwan, to HK$109 million (US$14 million).
Overall plastic goods exports from China to the U.S., for example, fell 10 percent in 2009, while toy exports fell 25 percent and consumer electronics and appliance exports fell 9 percent, Chen Hsong said.
Still, the growth in China's domestic market meant the company was able to double before-tax profit in the fiscal year to HK$208 million ($26.8 million).
The growth in domestic consumption in China in auto and appliances translated into significantly more demand for large- and ultralarge-tonnage presses, prompting the group to beef up production there and work to restore supply chains that had been weakened by the global financial crisis.
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