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.
Copyright 2010 Crain Communications Inc. All Rights Reserved.