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China’s plastics firms report strong first half

Kent Miller | PLASTICS NEWS CHINA

Hong Kong-listed plastics machinery and processing companies are posting strong results for the first half of the year, citing rising demand in China as automation along with overseas trade initiatives take hold.
Several processors and mold makers said they were launching expansion plans.
At plastic pipe-making behemoth China Lesso Group Holdings Ltd., sales rose 22.6 percent to 8.977 billion yuan ($1.24 billion) in the six months ending June 30, while net profits were 950.7 million yuan ($142.6 million), up 4.6 percent.
Lesso said it benefits from major infrastructure projects, including Beijing's emphasis on upgrading water supplies, sewage, drainage and flood control.
Looking ahead, the company anticipates the Chinese government's Belt and Road initiative to build infrastructure throughout Asia, the Middle East and Africa will drive demand for its pipes and fittings.
The announcements in the late August filings with the Hong Kong Stock Exchange mirrored reports earlier in the month, suggesting demand in China's plastics sector recovered from a tough 2016.
The country's biggest maker of injection molding machines, Haitian International Holdings Ltd., for example, reported sales rose 30.5 percent in the first six months of the year.
Two processors said they're investing.
Mold maker and processor TK Group (Holdings) Ltd.'s sales for the first six months of the year were HK$816.3 million (US$104.3 million), up 13.2 percent from the year-before period. Net profit rose 40.1 percent to HK$110.6 million (US$14.13 million).
In its interim report, the company said it spent HK$51.9 million (US$6.3 million) setting up a new unit specializing in ultra-large molds, primarily for the automotive industry, and another HK$141 million (US$18 million) expanding its plastic processing plants in Shenzhen and Suzhou and upgrading its mold-making capabilities.
It also suggested it was looking at acquisitions.
Eva Precision Industrial Holdings Ltd. said it remains optimistic even though its sales for first half decreased 4.2 percent to HK$1.516 billion (US$193.7 million) from the year-before period. Eva's mold making and plastics processing business was HK$643.9 million (US$82.2 million), or 42.4 percent of that total, down 9.8 percent.
One reason for the decrease was the temporary loss of a key customer, Samsung Printing Solutions, which was acquired by HP Inc. in September 2016.
However, Samsung has since renewed its contract to build office equipment with Eva.
Eva is now building a 753,000-square-foot factory in Weihai, Shandong province, to serve Samsung. The first phase is scheduled to commence production in the second half of 2019.
Eva said it's also expanding into Mexico, building a factory in San Luis Potosí, to serve nearby automakers and Tier 1 suppliers. The first phase, with 172,000 square feet, is slated for completion late next year.
In its management notes, Eva cited a common concern of Chinese manufacturers: the rising cost of mainland labor. In the six months ending June 30, Eva said it ramped up production at its new Vietnam factory while cutting companywide headcount 1.5 percent to 7,735.
Makers of injection molding machines touted automation and cost-cutting efforts for surging sales.
For the fiscal year ending March 31, Chen Hsong Holdings Ltd. reported sales of HK$1.451 billion (US$185.4 million), up 16 percent from the previous fiscal year.
Sales to mainland China surged 27 percent to HK$1.017 billion (US$130.0 million), while exports edged down 2.7 percent to HK$434 million (US$55.5 million).
Despite political uncertainty, European sales grew, while turmoil in Brazil and Turkey took its toll on the company's exports to those countries.
In a management statement, the company credited Beijing's One Belt, One Road and Made in China 2025 initiatives with sparking gains in the second half of the financial year.
Chen Hsong was candid about being hampered by supply chain difficulties, including unavailability of spare parts. It is working on developing new suppliers and working with existing suppliers to boost capacity.
It said it had good market response to its new MK6 injection molding machine, which is based on Japanese technology, selling nearly 700 units by March 31. Chen Hsong also sold two-platen machines to first-tier automotive parts manufacturers and shipped a 6,500-ton two-platen machine to Australia.
Toy maker Dream International Ltd. saw its sales rise 28.2 percent to HK$1.15 billion (US$147.4 million) in the six-month period ending June 30, compared to the year-before period. Sales of plastic toys jumped 103.1 percent to HK$491.7 million (US$62.8 million), driven by strong orders by existing customers.
The company moved its factory for ride-on toys from China to Vietnam, boosting the profitability of that unit. Overall, the company has four factories in China and 17 in Vietnam.
Lisi Group (Holdings) Ltd., a diversified company whose businesses include three Ningbo manufacturers of household plastics and electronics items, reported sales rose 14.2 percent to 1.240 billion yuan ($186.7 million) for the year ending March 31.

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