Hong Kong-based injection molding machine maker Chen Hsong Holdings Ltd. is expanding one factory and recently opened another, both in South China, as the country's strong domestic market pushed the firm's fiscal-year earnings to a record HK$2.42 billion (US$310.7 million).
Chen Hsong, one of China's largest press makers, is experiencing “red-hot” domestic demand now. However, the company said it expects next year to be more difficult because of Chinese government attempts to fight inflation and prevent economic overheating. Those efforts could include raising interest rates and tightening bank lending.
“These policies are likely to further shrink credit, tighten money supply and reduce free cash available to the group's customers,” Chen Hsong said in a June 22 filing with the Hong Kong Stock Exchange. “With lackluster economic conditions in Europe and the U.S., sluggish economic recoveries, high budget deficits and debt burdens, the group expects the market next year to be challenging.”
The factory expansions will help the firm compete in medium- and large-tonnage machines.
Earlier this year Chen Hsong began the third phase of an expansion at its Shenzhen facility and expects to complete that 861,000-square-foot project in 2012. The company also recently opened a 750,000-square-foot plant in nearby Foshan, China.
In March, Chen Hsong signed an agreement with Japan's Mitsubishi Heavy Industries Plastic Technology Co. Ltd. to develop a large-tonnage, two-platen machine series, the MMX, and produce the machines at Chen Hsong facilities.
Demand for machinery should continue to be strong in China's automotive market, which is now the world's largest and last year sold 13 million passenger cars, with projections for 15 million this year, according to Chen Hsong. The auto market and rapidly growing demand in the electrical appliances market combined to “create an extremely robust market for injection molding machines at a level seldom seen,” especially for the medium- and large-tonnage machines, the company said.
Car ownership levels in China are just 20 percent of what they are in mature markets like North America, Europe and Japan, providing room for continued growth.
Chen Hsong's production of small-tonnage presses returned to levels reported before the economic crisis, while production for larger machines will return to those levels by September, the firm predicts.
Chen Hsong also developed its second generation of servo-driven, energy-saving molding machines, the SVP/2 series.