Hong Kong-based custom plastics processor TK Group (Holdings) Ltd. plans to open a new molding facility in Suzhou, China, later this year and expand its mold-making capabilities, as it sees growing sales from the car industry.
The publicly traded company, which claims to be China's second-largest custom mold maker, disclosed the investment March 25 in its annual financial report.
It reported that sales rose 9 percent, to HK$1.2 billion (US$160 million) in 2013, mainly because of a sizable increase in sales of molds to the automotive industry.
TK did not disclose the size of the new investment in molding in Suzhou, the smaller of its two production bases, but said it would boost capacity there by 50 percent. It said it rented the new facility early this year and will start production in the second half of the year.
It also said it plans to set up new units making ultra-large molds for the auto industry and higher-end molds for the electronics industry.
TK's investment plans and guardedly optimistic outlook stand in contrast with broader signs of trouble in China's manufacturing industry.
The widely-watched HSBC China manufacturing output index, for example, in March hit its lowest level — and saw its fastest contraction — in 18 months.
Still, TK said its business was solid.
“In view of the gradual recovery of global consumer confidence, the management believes that the market has passed through the downturn and will slowly revive,” the company said. “The total production value of high precision plastic injection molds and plastic components is expected to maintain its upward trend, which favors the group's development prospects.”
“The group remains prudent yet optimistic about its prospects for 2014,” TK said.
The company's profit, however, did not match its increase in sales.
Profit fell 10 percent, to HK$121.3 million ($16.17 million), as it lost business with high-margin customers in the appliance and video game industries and had relatively pricey one-time costs associated with its initial public offering in Hong Kong's stock market.
The company said all of TK's sales growth essentially came from its mold making unit, which saw sales jump 33 percent to HK$476 million (US$63.4 million) on much larger demand in the automotive industry. Sales in its plastic molding division fell 2.4 percent to HK$721.8 million (US$96.24 million).
TK, which employs 2,900 people and has its largest production base in Shenzhen, plans more efforts to find acquisition targets in the mold making industry.
“We will also actively seek other mold fabricators who suit the scale of the group and generate synergies for potential acquisition to facilitate the group's business expansion and enlarge its market share globally,” the company said.
It raised approximately HK$365 million (US$48.6 million) in the December stock offering.