Strong price rises boost glass-maker

PUBLISHED : Saturday, 06 May, 2000, 12:00am
UPDATED : Saturday, 06 May, 2000, 12:00am

Luoyang Glass could see stronger earnings growth this year, bolstered by recovering product prices, improving profit margins and rising exports, according to executives.

The H share recorded its first net profit in three years of 56.16 million yuan (about HK$52.22 million) for the 12 months to December 31.

Beijing's policy of turning state companies' debt burden into equities has helped the company's change in fortunes.

Product prices had on average risen more than 10 per cent year on year during the first four months of this year, chairman Guo Xiaohuan said.

Gross profit margin last year was 18 per cent, a 10 per cent lift from a year earlier, he said.

Mr Guo said he did not expect a complete turnaround in an industry plagued by oversupply for several years, meaning most of the mainland's 15 state-owned glass-makers were loss-making, he said.

'Oversupply has not been completely resolved,' he said, adding that heavy oil prices had risen, pushing up production costs.

The company will upgrade one of its six production lines this year at a cost of 50 million yuan to improve efficiency.

Mr Guo said the company would be given a 100 million yuan two-year interest-free government loan to finance the upgrade. The company is one of three glass-makers to receive state support.

Mr Guo said exports should increase this year, and the company would focus on developing export markets in West Africa, Southeast Asia and the Middle East.

Last year's exports accounted for about 4 per cent of turnover.

Meanwhile, he said the company would demand from debt-laden Guangzhou International Trust and Investment Corp (Gzitic) at a creditors' meeting on May 20 cash repayment of a 146 million yuan deposit it placed with the firm.

Gzitic is restructuring to pay off creditors.

Mr Guo said he hoped the firm would be able to write back this year part of a 50 per cent loss provision it made on the deposit.

Luoyang Glass has been unable to recover the deposit since Gzitic ran into financial troubles two years ago.

The People's Bank of China has set aside about 38 billion yuan to help repay Guangdong's co-operative bank debts and foreign liabilities at 14 provincial trust and investment companies.

As a mainland-based creditor, Luoyang Glass would have the option to be repaid either by cash or equity, he said.