Textile quota worries hit Fong's
The possible imposition of quotas on Chinese textiles cut last year's net profit at Fong's Industries, the world's biggest maker of textile dyeing machines, by 15 per cent to $235.11 million.
Sales of textile machines, which made up 55 per cent of the Hong Kong-listed firm's business, fell 10 per cent last year, executive director Bill Fong Kwok-chung said.
He said Hong Kong textile firms had put off buying equipment due to uncertainty over 'safeguard quotas' on Chinese textiles.
'Hong Kong and mainland textile companies were very frustrated by all this uncertainty. The whole industry was in limbo because it couldn't plan, not knowing what the restraints would be,' he said.
China and Hong Kong account for the majority of Fong's turnover.
Operating profit from its core product, textile dyeing machines, fell 35 per cent to $147 million last year, but was offset by a tripling of operating profit from its steel trading and casting business to $98 million. Mr Fong predicted that growth in textile machine sales in China would be flat or slow this year, as it was difficult to plan ahead without knowing if or when quotas would be imposed.
This year, the firm's textile machine sales should rise 15 per cent, and profit from textile machines should grow at a higher percentage, he said. 'We're seeing double-digit growth in orders from Asia.'
Fong's sales of textile machines outside China grew in double digits last year. Its steel trading and casting business jumped 83 per cent to $781 million on high steel prices. Turnover rose 29 per cent to $1.74 billion.