HONG KONG (Aug. 24, 1:25 p.m. ET) — Supply chain disruptions from Japan's crisis have hit the earnings of Chinese injection molder and metals processor Eva Precision Industrial Holdings Ltd., although the company said it believes that the worst is behind it.
Net profit fell 25 percent in the first six months of the year, to HK$104.2 million (US$13.3 million), as sales growth slowed to only a 7.1 percent gain, to HK$879.0 million (US$112.7 million), the company said.
“Our business growth was temporarily slowed down by the earthquake in Japan and the nuclear emission and massive power disruption that followed, which hit our customers' supply chain in Japan,” Eva told the Hong Kong stock exchange in an Aug. 23 earnings report.
The Hong Kong-based company, which has about 100 injection molding machines, has significant business with Japanese office products manufacturers like Canon.
Operating costs for the firm rose because customers found it difficult to plan their production processes as the crisis deepened, and because the firm had already taken on new workers in China in anticipation of growth before the quake, Eva said.
Sales from its plastic injection unit rose 10 percent, to HK$260.4 million (US$33.4 million), while sales in its plastic mold making unit dropped 25 percent to HK$45.1 million (US$5.78 million), as the aftermath of the crisis pushed companies to delay new projects, Eva said.
Still, Eva Chairman Zhang Hwo Jie said in a statement that major customers have told them that “the worst is now behind us,” and he noted that the firm still saw revenue growth because customers are concentrating manufacturing with larger firms like Eva.
The company also opened its first West China production base in July, acquiring a metal stamping firm in the city of Chongqing. The investment will help it grow in China's domestic automobile components manufacturing market, Eva said.
The company has previously said it wants to diversify business away from a heavy reliance on Japanese exports.
The firm may also be poised to make a large investment in another inland Chinese city, Wuhan, Hubei province, telling the Hong Kong stock market in June that it was looking at acquiring land there for factories.
Chinese newspapers reported that the firm had reached a 1 billion Chinese yuan (US$156.3 million) agreement with Wuhan's government for an auto parts production base, but the company disputed that any deal had been reached.
“The size and scale of the production plants to be constructed are still under consideration,” Eva said.