HONG KONG (July 2, 11:55 a.m. ET) — Slowing sales in China and the European debt crisis have hit hard at Hong Kong-based injection molding machinery maker Chen Hsong Holdings Ltd., pushing sales and profit down more than 24 percent.
The company, which is one of China's largest plastics equipment suppliers, put the blame on tougher domestic conditions in China as a result of tighter monetary policies, plus continued global uncertainty weakening the country's exporters.
“Based on global economic conditions, the group believes that China will continue to face headwinds in the coming future,” Chen Hsong said in its June 22 annual report to the Hong Kong stock market. It said that without changes in Chinese government policy, it is “not optimistic” about its markets this year.
“The financial year has been a roller-coaster ride for the group, primarily due to a gradual weakening of the China market – which had been driving world economic recovery – since the second financial quarter (i.e. July 2011),” the company said. “As the already well-battered Chinese export sector continued to sink deeper, China GDP growth started to slow markedly during the second half of 2011.”
The company said its sales for the financial year ending March 31 dropped 24 percent, to HK$1.83 billion (US$235.9 million), while profit fell 53 percent to HK$160 million (US$20.6 million).
It said sales in mainland China and Hong Kong dropped 31 percent, to HK$1.21 billion (US$155.9 million), as China's government put in place tight monetary policies designed to cool an overheating economy and tap down a real estate bubble.
As well, the company said the European debt crisis “continued to exert great pressure on China exports” to the European Union, the country's largest trading partner.
“The export sector in China had never really regained its vigour since the financial crisis, with dwindling orders and shrinking margins, which persistently shunted appetite for capital investments,” it said.
The company noted some bright spots globally, though. It said economies in North and South America and a number of developing markets showed robust recovery, particularly in the United States.
But it said that was not able to overcome large declines in its European exports, and that pushed international sales down 12 percent overall, to HK$460 million (US$59.3 million).
It did note that plastics machinery sales to Taiwan grew 13 percent, to HK$167 million (US$21.5 million), as companies there benefitted from growth in the United States.
It said it would accelerate investments into developing countries this year and set up new subsidiaries and sales networks.
Chen Hsong also said that it was continuing to make progress in its technical cooperation with Japan's Mitsubishi Heavy Industries Plastic Technology Co. Ltd., introducing two new models of the Mitsubishi “MMX” series of large, two-platen, servo-driven molding machines.
It said the full series of MMX machines, made by Chen Hsong for Mitsubishi, will enter regular production this year, and it said Mitsubishi has increased orders for the machines.
It also said its Chen Hsong-branded version of the machine, dubbed “Ultramaster X,” would start production this year, targeting premium markets in automotive, export household appliances and others.