HONG KONG (Sept. 18, 8:30 a.m. ET) — Growth and new investment at Hong Kong injection molder and moldmaker Ace Corp. Holdings Ltd. highlights a split in China's plastics sector, with the stronger companies seemingly getting stronger while some weaker firms look at hard times.
Ace, which said it's seeing more than 25 percent growth this year on top of a record 2011, claims that investments in technology like automation and plating of plastics, along with a push into new locations like a molding factory in Anhui Province, are giving it new opportunities.
Ace CEO Jack Yeung also is chairman of the Hong Kong Mold and Die Council, and he said from that position, he sees a split in South China's plastic molding and moldmaking industry.
“We've seen a lot of the smaller shops who are less competitive or don't have their niche technology, they are suffering now [and] are running at about 60 percent to 70 percent capacity,” Yeung said. “However, for the stronger companies, the bigger companies that have their core knowledge and customer base, they are all full. They are working day and night on projects.”
That trend is playing out in reports from other companies. China's largest plastics equipment makers have all reported much tougher conditions lately, with rising wages and a slowing economy in China, along weak exports because of the euro zone crisis, taking a toll.
Hong Kong toy maker Kader Holdings Co. Ltd. said its contract manufacturing toy business saw sales down 25 percent in the first half of the year, to HK$156.7 million (US$20.2 million), with the situation leading some competitors to shut down.
“The global economy is still affected by the uncertainties related to the European sovereign debt crisis,” the company said in an Aug. 30 financial report. “Together with rising operating costs, these factors pose potential challenges to the entire toy industry. Amid the difficult operating environment, a growing number of small-scale toy manufacturers were forced to leave the market.”
Others, however, reported rising sales.
Ningbo, Zhejiang province-based auto parts maker Minth Group Ltd. said sales rose 17 percent in the first half, to HK$2.12 billion (US$273.4 million), as opportunities increased in overseas markets and investments in factories in Thailand and Mexico began to pay off.
Minth said profit rose 12 percent, with China's domestic market showing modest growth, its Japanese customers seeing a recovery and the company landing new business with BMW.
Ace, which employs more than 2,000, said new technology has played a strong role in growth.
The company is adding its third production line for plating of plastics at its facility in Zhuhai, Guangdong province. It started that factory in 2008 and has seen demand increase quickly, Yeung said.
As well, the company acquired the assets of a Hong Kong automation firm recently, and started a unit to bring lean manufacturing into its factories and boost efficiency.
Ace is also launching production of robotic insert molding in Shanghai to automate production, and moving its injection molding of engineering plastics to inland China at a new facility in Hefei, Anhui Province, Yeung said.
He spoke in an interview at a late August news conference for the Asiamold trade show, to be held Sept. 19-21 in Guangzhou. The Hong Kong Mold and Die Council is an official supporter of the show.
He said tough financial conditions are causing customers to consolidate their supply base.
“A lot of the customers are asking for financial information before they place the order to insure [suppliers] are in a sound financial situation,” he said. “For the companies who can provide a very good report… these are the companies which the customer will be relying on. Although the economy is slow, the amount of business that is still out there is a lot.”
He said Ace's sales are on pace this year to hit US$120 million, up more than 25 percent, and the privately held company is seeing its profit up as well: “We will have a very strong second half of the year” and it appears it will continue into 2013.
While consumer electronics markets in general are slower, companies like Samsung and Apple are strong, and the company is seeing opportunities in the car industry in the United States, Yeung said.
“We can see the Apple business is very good and the Samsung business is very good,' he said. “Automotive in China is a little slow but automotive in the U.S. is still fairly strong. We can see there is a huge demand for molds in the American market for automotive. It depends on which sector you are in and how diverse you are.”