Well-equipped to meet challenges ahead
CHTC Fong’s Industries Company Ltd. (CHTC Fong’s) is optimistic about the growth performance of the group in 2014 and beyond, despite the lingering uncertainties surrounding the global economy. Given the demand for environmentally friendly dyeing machinery with high value for money has been strong, the group is watching the market closely and formulating its business and marketing strategies to capture opportunities that arise from the “energy-saving and environmentally friendly” and “industrial transformation and upgrade” trends in the textile industry.
The group will seek to grow and improve steadily, and will continue to commit more resources to new product research and development, production cost reduction, marketing promotion and innovative business model, so as to further strengthen its competitive advantages and increase its market share. The group has already seen a rebound in 2013, and expects this to continue in 2014, with steady and healthy business development.
CHTC Fong’s recently announced that the construction of phase II of the plant is situated in the Linhai Industrial Park of the Zhongshan Torch Hi-Tech Industrial Development Zone, Guangdong Province, is expected to be completed by early 2017. Upon relocation of the production facilities from the Shenzhen plant to the Zhongshan plant, the group’s overall production capacity will increase substantially, the manufacturing skills will be further enhanced and the advantages of having resources in Shenzhen and Zhongshan will be better leveraged, further catering to its future development needs. Preliminary estimated construction and capital expenditure of the new plant is approximately HK$800 million, which will be financed by the group’s internal resources and bank borrowings.
Golden Jubilee, a turning point
The year 2013 marked the 50th anniversary of the group and its Golden Jubilee. It adopted a new management structure, building a solid foundation for future development. The company was also renamed CHTC Fong’s Industries Company Ltd., to better reflect the close relationship with its parent company. The year 2013 also marked the beginning of a new stage in the development of sthe group which believes that it will enter into a new and prosperous chapter in its future development.
It was also an exciting year of transformation for the dyeing and finishing machine manufacturing business of CHTC Fong’s Industries Company Ltd. Following the completion of the acquisition of the German Monforts Group by it on November 30, 2012, Monforts Fong’s Textile Machinery Co. Ltd. and its subsidiaries (collectively “Monforts Fong’s”), which were originally joint ventures of the group, have become its subsidiaries. This laid an essential cornerstone for CHTC Fong’s to expand its business in the future, and reached a new milestone with the dyeing and finishing machine manufacturing business strategy of the group.
With this acquisition, the group is able to further enhance its technology in the dyeing and finishing machine manufacturing industry. It is also able to provide its customers in the textile industry chain with one-stop quality products and excellent customer services, which further strengthen the position of CHTC Fong’s as a leading dyeing and finishing machine provider in the global market.
At present, the group is focused on leveraging the synergies and cost benefit brought by the acquisition of the German Monforts Group, with an aim to boost its overall profitability.
In 2013, CHTC Fong’s core businesses continued to be manufacturing of dyeing and finishing machinery, trading of stainless steel items and manufacturing of stainless steel casting products. The group’s consolidated revenue amounted to approximately HK$3,757 million (2012: HK$2,126 million), an increase of 77 per cent as compared to the previous year.
The revenue of the dyeing and finishing machine manufacturing business accounted for 75 per cent of the consolidated revenue, which was higher than the previous year and continued to be the most important revenue source of the group. Meanwhile, the revenue of stainless steel trading and stainless steel product casting business accounted for 11 per cent and 14 per cent accordingly.
The increase in the consolidated revenue was mainly attributable to the increase in the revenue of the dyeing and finishing machine manufacturing business, thanks to the revenue of the German Monforts Group and Monforts Fong’s, which was included in the group’s revenue during the year, after the acquisition of the German Monforts Group, the greater efforts in marketing development by the group, and to the newly-introduced TEC series high temperature dyeing machines and SYN-8 airflow dyeing machines which were well received by the customers, leading to satisfactory sales.
Increased customer orders, combined with the implementation of improved production techniques and processes that trimmed costs, contributed to a significant improvement in the operating performance of the group’s dyeing and finishing machine business segment and encouraging growth in the gross profit margin. The group continued to implement prudent business principles, strictly control production efficiency and costs and continuously improve the cash flow position. It also continued to invest resources in R&D, technologies, design and marketing to further strengthen its brand, improve product quality, enhance its technical services offering and broaden the market coverage of its products.
The group is currently in the process of reviewing its existing organisational structure and improving its management standards with a view to further streamlining its corporate structure and to generating more group-wide synergies. It is confident it can leverage its solid financial foundation, strong management team and its ability to offer quality products to further enhance its competitiveness.
For the year ended December 31, 2013, the group’s dyeing and finishing machine business segment recorded revenue growth of 128 per cent with sales of approximately HK$2,840 million (2012: HK$1,246 million), accounting for 75 per cent of the revenue. Operating profit generated from the dyeing and finishing machine business segment was approximately HK$135 million in contrast to an operating loss of approximately HK$112 million in the previous year.
Currently, the group is focused on harnessing the synergies and cost efficiencies arising from the acquisition of the German Monforts Group in order to expand its penetration along the textile industry chain and provide the market with more advanced dyeing and finishing equipment, thereby further enhancing the overall profitability of the group.
As phase I of the Zhongshan plant, which has excellent fundamentals, became operational in September 2012, Monforts Fong’s has remained on track in production and management, and overall productivity is gradually improving. The business is expected to show consistent growth.
Monforts Fong’s is actively investing in manpower and other resources to strengthen its management and the competitiveness of its product lines in order to boost its sales and market share quickly and efficiently. The Board believes that products from Monforts Fong’s will become a new driving force for the group’s revenue and profit growth in the coming year and beyond.
As the global community has attached greater importance to environmental protection, many customers plan to upgrade their existing dyeing and finishing machines and establish additional sewage treatment facilities in order to improve product quality and production capacity as well as to prepare for compliance with the new and more stringent emission standards. This industry-wide development has provided great opportunity for the group. In 2007, through its own R&D team, the group successfully developed a wastewater reuse system and corresponding equipment, which was primarily designed for dyeing factories. This system is now entering its harvest stage. The group will actively seek projects to make it become a new profit driver in the near future.
In the long run, the group believes that the outlook for the dyeing and finishing machine industry is bright. Its proven track record in offering quality products with advanced proprietary technologies will not only help customers to reduce their production costs, but will also gain positive reputation for the group and ensure strong and sustained market demand for its products.
Looking forward to 2014, CHTC Fong’s is cautiously optimistic about the performance of the group’s dyeing and finishing machine business segment and is confident that the group is well positioned and prepared for the opportunities that the upcoming global economic recovery may bring, as well as to handle any potential challenges.