Softness in China hits Haitian results

By Steve Toloken | HONG KONG (Aug. 21, 2 p.m. ET) -- In the latest sign of significant slowing in China’s plastics industry, the country’s largest injection press maker, Haitian International Holdings Ltd., said Aug. 21 that sales for the first half of the year dropped 14 percent to 3.17 billion Chinese yuan (US$498.6 million). Haitian said it was satisfied with the results given the tough conditions, and there are signs it may be faring better than some peers – rival Chen Hsong Holdings Ltd. reported sales fell 24 percent and Cosmos Machinery Enterprises Ltd. warned investors this month it may lose money in the first half of the year. Taken together, those and other reports indicate continued softness in one of the world’s largest plastics markets. “The situation in China is quite difficult,” said Helmar Franz, executive director of Ningbo, Zhejiang province-based Haitian, in an Aug. 21 news conference in Hong Kong connected to its earnings report. Haitian estimates that one-third of the plastics machinery manufacturing companies in Ningbo, a major center of plastics machinery in China, have stopped production and another 20 percent are operating at significantly reduced capacity. Haitian’s CEO, Zhang Jianming, is head of Ningbo’s plastics machinery trade group. Recent signs of worsening in China and the world economy make it “increasingly difficult” to predict sales trends for the remainder of the year, the company said in its financial filing to the Hong Kong stock market. But on the positive side, Haitian said sales in first half of 2012 stabilized from a low point in October 2011. Its first-half results were similar to second-half 2011, and it said it was hopeful that relaxation of credit in China and efforts to support the Euro would lead to gradual improvement. “The first half of 2012 was a challenging period for [the] machine manufacturing industry… in China, marked by the slow-down of China’s growth momentum and the deteriorating Eurozone’s sovereign debt crisis which together weighted heavily against investor and consumer sentiment,” the company said. Haitian officials said the first-half sales drop of 14 percent from $3.7 billion yuan (US$578.3 million) in the same period of 2011 is acceptable partly because the first six months of 2011 set a half-year sales record, fed by what it said was an overheating economy in China. It said profit for the first six months of this year were down 19 percent to 486 million yuan (US$78.3 million), although it maintained its profit margin at just over 15 percent. Its biggest challenges now seem to be within China, where Haitian sales were down 21 percent to 2.08 billion yuan (US$327.0 million) in the first half. But the company said there were some promising areas: despite trouble in world markets exports remained stable and sales of its higher-tech products all grew in the first half of the year. For example, sales of its all-electric Venus machines increased 7.3 percent, the Jupiter series two-platen machines increased 25.5 percent and sales of IA series for multicolor molding rose 26 percent. Export sales were driven in part by manufacturing relocating from China as wages rise more than 10 percent a year and China’s currency has strengthened, Franz said. For example, Haitian’s exports to North America, including Mexico, more than doubled in the first six months to 134.5 million yuan (US$21.3 million). “We not only see Americans moving back to Mexico or America, but we also see some Singaporeans moving to Vietnam, which are customers of ours and they encourage us to come with them to Vietnam or Thailand because the cost situation in Thailand or Vietnam is much better than the situation in China,” Franz said. “Those people who just took advantage of the cheap labor, they will now consider other locations.” Haitian has invested in overseas factories in recent years, in Vietnam, Brazil, Turkey and Germany, and in setting up offices and service centers in India, Japan and the United States. Franz, a longtime plastics machinery executive in Germany who has worked in Ningbo for seven years for Haitian, said there’s also uncertainty in China’s business community ahead of the change of power in the Chinese government expected later this year. But he argued that its economic problems are temporary and the government will craft solutions to challenges facing its manufacturers, as it has in the past: “I don’t think this is a long-term decline and a long-term situation.” http://www.plasticsnews.com/headlines2.html?id=26294