As cosmetics manufacturers struggle with falling sales in China, cosmetic packaging firm Shenzhen Beauty Star Co. Ltd. also has been hit hard.
The publicly listed company posted a 6.7 percent year-on-year drop in sales to 477 million yuan ($74.9 million) for the first half of 2015. It also reported a net loss of 12.6 million yuan ($1.9 million), while the same period last year was in the black.
The company blamed its end market for the disappointing financials.
“China's overall cosmetics market maintains growth, but the growth rate has dropped to single digit[s],” it said in the mid-year report, “The battle for sales in the cosmetics industry is increasingly fierce, and our main customer base — tier one global cosmetics companies — suffered serious performance distress.”
As a result, Beauty Star said it saw a continued decline of customer orders. It makes plastic tubes, bottles, jars and caps mostly for the cosmetics industry.
In response to the challenges, the company said its entire staff has been actively securing orders and improving service levels and has managed to increase orders in the second quarter compared to the first quarter.
It also increased R&D investment to dive into new products and markets, including food packaging.
On the production side, it maneuvered capacity at its three production bases. It moved its plant in Shanghai to Suzhou, to be closer to customers. It also adjusted production lines in Guangzhou for more efficient production.
Despite technical improvement efforts that effectively controlled material and labor costs, the company said its fixed costs such as equipment depreciation continued to rise and erode margins.
The company also reported that it led the drafting of China's first national standards for seamless laminated coextruded plastic-aluminum tubes. The standards, scheduled to take effect Dec. 1, are expected to help Beauty Star expand its market share.