Chinese plastics firms report sales, earnings growth

In a flurry of financial reports, Chinese and Asian plastics firms are posting generally solid results.

While noting some challenges in China's economy and trade friction with the U.S., the companies were generally touting good returns on the back of Beijing's continued infrastructure spending, faster economic growth last year and strategic moves like shifting lower-end manufacturing to Vietnam.

At pipe-making giant China Lesso Group Holdings Ltd., for example, sales rose 18.2 percent to 20.36 billion yuan ($3.246 billion) for the year ending Dec. 31. Gross profit was 5.314 billion yuan ($846.0 million), up 16 percent.

Pipes and pipe fittings represented nearly 90 percent of those sales, and the company told the Hong Kong Stock Exchange that it's benefited greatly from Beijing's aggressive spending on water, sewer, drainage, power supply and telecommunications.

Continued migration from coal heating, for example, is driving demand for natural gas pipe. Sales in this category jumped 119 percent to 412 million yuan ($65.6 million).

Lesso's dominant market is the mainland, as exports amounted to only 3.5 percent of sales.

Still, the company sees opportunities in other countries from Beijing's Belt and Road Initiative, and as it continues to try to build a global presence for its lessohome.com interior decoration products business, establishing service centers in the United States, Canada, Australia, Asia and the Middle East.

This year, the company said it plans to open a Lesso Home center in New York.

The firm has 22 production facilities throughout China. The most recent opened in Hunan in the second half of 2017. Two production facilities are under construction in Zhejiang and Fujian provinces.

At machine maker and processor Cosmos Machinery Enterprises Ltd., sales climbed 11.6 percent to HK$2.447 billion (US$311.8 million) for the year ending Dec. 31. Sales of injection molding machines were HK$902.9 million (US$115.1 million).

The operating profit was HK$63.35 million (US$8.07 million), compared to a HK$270.2 million (US$34.4 million) loss in 2016, as the company said it saw results from a restructuring it started two years ago.

In its report, Cosmos said sales of two-platen machines targeted at the automotive and household electrical appliances industry were especially strong. Sales of customized machines were also good, with the company saying it wants to continue with quality improvements in this sector.

The company's plastics processing units posted sales of HK$389.8 (US$49.68 million) despite typhoon damage that halted production at the Zhuhai plant for three months.

Cosmos attributes the gains to better use of production capacity, tighter control of production costs and enhanced quality.

Looking forward, the Cosmos board expressed optimism but noted concern about the cost of raw materials, a shortened life cycle for consumer products, and increasing volatility in relations between the world's two-largest economies.

"The economic and trading relationship between the United States and the PRC [People's Republic of China] is getting more dynamic with uncertainty," it said.

Export-driven toy maker Dream International Ltd. saw its sales rise 34.6 percent to nearly HK$2.9 billion (US$369.1 million), as the company said a shift of its manufacturing to Vietnam was paying financial and business dividends.

Production efficiencies and economies of scale boosted gross profit 36.6 percent to HK$832.8 million (US$106.1 million), it said.

Sales of plastic figures accounted for about half of its business and jumped 112.2 percent to HK$1.336 billion (US$170.3 million).

Dream said it saw efficiency gains after moving production of its ride-on toys from China to Vietnam. Sales of this segment almost doubled, to HK$63 million (US$8.02 million). Sales of plush toys, traditionally Dream's bread-and-butter, were up fractionally at HK$1.497 billion (US$190.8 million).

North American sales were 63.2 percent of the total, followed by Japan, with 24.8 percent, and Europe, with 5.2 percent.

Dream has four plants in China and 14 in Vietnam, with another plastics figures factory under construction in Hanoi.

Management said it is optimistic, noting that further consolidation in China's hypercompetitive toy manufacturing industry "will create greater room for growth for market leaders such as Dream International, especially now that the group has strong production bases in Vietnam and is able to enjoy lower labor costs and currency pressure."

Singapore-based precision processor and mold maker Sunningdale Tech Ltd. reported sales of S$724.6 million (US$553.4 million) for the year ending Dec. 31, up 5.9 percent from 2016. Gross profit climbed 11.9 percent to S$105.6 million (US$80.66 million).

Sales of the group's automotive segment grew the most, up 7.5 percent to S$263.8 million (US$201.5 million). The consumer and IT segment saw 4.3 percent growth to S$284.8 million (US$217.5 million), while health care sales ticked up 6.6 percent to S$51.7 million (US$39.49 million).

In a statement, the company is optimistic despite unpredictable macroeconomic factors, including shifting currency-exchange rates.

"We expect the global business environment to remain subdued as rising economic uncertainties continue to present us with challenges. However, our overarching strategy of building a sustainable and profitable business model is well on track," said Chairman and CEO Khoo Boo Hor.

This year Sunningdale plans to open a new 15,000-square-meter (161,000 square foot) plant in Penang, Malaysia. The company currently has 19 manufacturing sites in Asia, South America and Europe.