Metal firm to play safe with new purchases
Asia Aluminium Holdings, the region's largest aluminium extruder by production capacity, plans to acquire two more plants in the next 12 to 18 months but will be cautious on pricing to reduce any potential goodwill write-offs.
The company, whose manufacturing base is in Guangdong province, posted a 32.7 per cent year-on-year fall in net profit to HK$131.4 million in the year to June 30.
The fall was due mainly to a HK$73.55 million goodwill write-off stemming from its acquisition of two extrusion plants last year.
Managing director Benby Chan said under a new accounting rule implemented last year, the company had chosen to take a one-time write-off instead of amortising the goodwill over a number of years.
He said Asia Aluminium had paid a premium for the two plants last year because they had a good market position in the communal housing sector and their client portfolios were worth the premium. Acquisition of a business database relating to the plants accounted for the goodwill.
Mr Chan said the company would proceed with acquisitions cautiously to avoid big write-offs in the future.
Turnover fell 4.7 per cent year on year due to a fall in prices of aluminium, the company's raw material. Gross profit margin rose from 21 per cent to 22.9 per cent.
Mr Chan said the two plants it planned to buy would have a production capacity of about 20,000 tonnes and cost about HK$200 million each. Annual production capacity now stands at 120,000 tonnes.
The new plants would probably come from among five plants with which Asia Aluminium had established sub-contracting relationships.