HONG KONG (April 26, 12:30 p.m. ET) — Hong Kong-based plastics machinery maker and processor Cosmos Machinery Enterprises Ltd. saw its profit drop sharply in 2011, but it hopes a focus on energy-saving machinery and investments in a molding factory targeting China's consumer electronic markets will help turn things around.
The publicly-listed company said both sluggish demand in export markets and slower growth in China meant that sales were flat in 2011, at HK$2.41 billion (US$310.6 million), with modest profits of only HK$34 million (US$4.3 million).
Cosmos said in a March 29 filing to the Hong Kong stock market that it did not expect any immediate improvement in business conditions.
“Looking into the macroeconomic environment of 2012, there are still many uncertainties,” the company said. “Manufacturing and exporting businesses will experience the worst ordeal since the financial crisis back in 2009.”
Cosmos, which gets about 45 percent of its revenue from plastics machinery, said sales in that unit were flat for the year.
The second half of 2011 saw its customer base of plastics processors cut back on equipment purchases, in response to tightened bank lending in China and the European debt crisis, among other factors.
As well, the company's own plastic processing unit, which accounts for about 19 percent of its sales, saw profit squeezed.
The unit's sales rose 13 percent, to HK$446.4 million (US$57.5 million), but profit plunged to break-even levels of HK$1.6 million (US$206,000), as rising raw material costs and higher wages in China ate up any gains.
Company-wide, Cosmos saw profit drop from HK$297 million (US$38.2 million) in 2011 to HK$34 million last year.
“Despite of the completion of the short-term measures taken by the countries to boost [the] economy, the world economy did not see a rapid recovery,” Cosmos said. “Instead, it has actually become weaker.”
Still, the company said that it was continuing to focus on developing new products. It said its energy-saving line of injection molding machines with servo-motors now accounted for 70 percent of machinery sales.
And it said it commercialized an injection-extrusion manufacturing process that can handle ultra-large size shots, up to 300 kilograms, and intends to use the technology for large pipe fittings and containers.
As well, the company said it is on track to open previously announced investments, including a molding factory in Hefei, Anhui Province, with 42 injection molding machines targeting China's domestic appliance and electronics markets.
It started a new business last year making “environmentally-friendly” kitchenware targeting the North American and European markets. And it opened a new, upgraded factory for its machinery business in Wuxi, Jiangsu Province in November.
“The market demand for energy-saving products, biodegradable products and environmental-friendly products is growing steadily, and the group's development of different businesses in this area have achieved desirable outcomes,” the company said.