Tough times in toyland

PUBLISHED : Tuesday, 14 March, 1995, 12:00am
UPDATED : Tuesday, 14 March, 1995, 12:00am

HARBOUR Ring International Holdings will have its business and financial acumen put to the test during the next couple of years.


For the company which gave the world the Teenage Mutant Ninja Turtles, all is not well in the toy industry these days. Costs are rising, margins are being squeezed and analysts are predicting that Harbour Ring will be able to find little financial joy in toy sales next year.


According to a number of analysts the sky rocketing cost of plastic used to make toys is escalating almost exponentially and burning a hole in the company's (as well as other toy maker's) profit margins.


However, while there doesn't seem to be another Ninja Turtle phenomenon on the cards yet, toy sales in the US are expected to provide the company some relief, matching the seven per cent recorded last year.


No longer is there a quota on toys manufactured in China where Harbour Ring has concentrated much of its production. This should also help the company's profit picture in the coming years.


On the debit side, is the news that the European community will begin this year to impose a similar quota on Chinese-made toys, which will no doubt cut into the company's returns.


According to a number of analysts the best that Harbour Ring can hope for is for limited growth in earnings from their toy business.


Equally problematic is the company's involvement in the property game. This year they are going to book an estimated $200 million in the sale of Hong Kong property which makes their profits 'acceptable.' In fact, if it were not for the sale of the assets, their returns from the toy game would look downright anemic.


Analysts are of two minds about the company's involvement in the property game in China.


Some regard their forays into China as a real liability, given the uncertainty of the Chinese property market.


Others say their investments in Shanghai are sound and the company will book solid profits from the sale of these assets in the coming years.


What is ironic, is that in the long run, the company may eventually shift its focus more and more into property.


It remains to be seen whether investors want the makers of the Teenage Mutant Ninja Turtles to wander off into this new avenue of business or put their noses to the grindstone and trim costs and get back to business at hand. The toy business.


 

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