Interest costs hit Fountain Set result
Out of an attributable net of $210 million, knitted fabric producer Fountain Set (Holdings) says interest expenses were $100 million to service total debt of $2.86 billion.
'Textiles is a capital-intensive industry which needs heavy investment,' said chairman and managing director Ha Chung-fong.
He said heavy bank borrowings had prepared the company for further expansion. The company's debt-to-equity ratio had dropped to 170 per cent, finance director Lawrence Lau Hong-yon said.
Despite the heavy borrowings, Mr Ha said the company was committed to spending $60 million on machinery this year, including the second-phase development of its knitting and dyeing plant in Sri Lanka.
Executive director Lam Wing-tak said after the expansion, daily production of dyed fabrics could double to 40,000 pounds.
'We will start the expansion programme in the second quarter,' he said.
'After the expansion, sales from the plant will account for 15 per cent of the company's total turnover.' He said fierce competition in the dyeing industry on the mainland had set the profit margin lower than in Sri Lanka.