A slump in investment in China's plastics industry and a general slowdown in the country's manufacturing industry pushed sales and profits down sharply for injection machine maker Chen Hsong Group in the six months ending Sept. 30.
The Hong Kong-based firm said sales fell 12 percent, to HK$854 million (US$110.1 million), and profit dropped 69 percent, to HK$20 million (US$2.6 million), which it blamed on China's economic growth slowing to 7.3 percent in the July-September quarter, its worst quarterly performance since the financial crisis of 2008.
As a result, the publicly listed company, which is one of China's largest makers of injection molding machines, said it was delaying start-up of its new factory in Shenzhen. That plant would have increased its production capacity by 40 percent.
“Manufacturing companies in China, caught between the weakening domestic demand and [a] persistent tight credit situation, showed little desire for further capital investments in production machinery,” the company told the Hong Kong stock market.
“Almost all domestic consumer industries in China (e.g. electrical appliances, household goods, mobile phones, etc.), with the [probable] exception of automotive, were in a state of close-to-zero growth or negative growth,” Chen Hsong said, as export demand for China's manufactured goods was not able to compensate for weakness in China's domestic economy.
As a result, the company said its sales in mainland China and Hong Kong fell from HK$653 million (US$84.2 million) in the same period last year to HK $493 million (US$63.6 million) this year.
There was one bright spot: Chen Hsong said world markets were generally positive for its machinery.
Sales in overseas markets rose 25 percent, to HK$308 million (US$39.7 million), as the company said its efforts to expand overseas with new subsidiaries in Europe, Brazil and Dubai generally began to show promise, although it cautioned that Brazil was a weak spot because of economic troubles there.
To try to escape what it said was overcapacity in traditional markets, the company said it developed its SVP/3 series of servo-driven machines targeting more complex applications, whether in raw materials or molding performance.