HONG KONG (Feb. 28, 2:35 p.m. ET) — Slack export demand caused by the Euro zone debt crisis, coupled with uncertainty in the United States, pushed Hong Kong compounder Ngai Hing Hong Ltd. into a loss for the last half of 2011. But the company said those setbacks were offset by solid results in its mainland Chinese business, and it said it plans to continue its shift its focus there.
Ngai Hing Hong said in a Feb. 27 filing to the Hong Kong stock market that sales were down about one percent, to HK$825.6 million (US$ 106.4 million), with a loss of HK$8.2 million (US$1.05 million).
Losses were concentrated in its export-oriented plastic materials trading business, which accounts for about 65 percent of the company's turnover.
“The Euro zone debt crisis and the resulting economic recession have led to an overall drop in demand,” the company said. “Manufacturers generally adopted a wait-and-see attitude towards exports which has caused the price of plastic materials to drop.”
But sales in its colorants unit, which targets mainland Chinese markets, rose 11 percent to HK$174.6 million (US$ 22.5 million), with profits up 28 percent to HK$9.4 million (US$1.2 million).
“The slowdown in exports to Europe and the US did not have a major impact on this segment due to the continuous stable growth of the mainland China economy and the application of the group's products in daily necessities such as food packaging, large home appliances and auto parts,” the company said.
The company's third major business unit, engineering plastics, also suffered from weakening demand in the U.S. and Europe.
Sales in that business were down 15 percent to HK$120.7 million (US$15.5 million), and profits were off 42 percent to HK$7.6 million (US$980,000).
But it said the more stable customer base in that unit kept it relatively stable, and it said it continues to invest in research and development in engineering plastics, such as making plastic replacements for stone and wood in household and toy products.
“In the medium-to-long run, this business segment is expected to become one of the Group's growth drivers,” the company said. It opened a new, larger engineering plastics compounding plant in Taipo, Hong Kong, in August, and it expects that facility to improve its R&D capabilities.
The company said it continues to shift its focus to mainland Chinese markets, expanding its sales office in Chengdu, Sichuan province, and looking at sales offices in other Western and Central Chinese cities, including Chongqing and Wuhan, Hubei Province.
“While affected adversely by the Euro zone debt crisis, the economy in mainland China continues to spur on growth,” Ngai Hing Hong said. “The Group has gradually shifted its focus to the mainland China market with the aim to boost market penetration and capture the opportunities available there.”