Joint venture to make spandex faces cash woes
Jiangsu project delayed until next year as mainland partners plan stake revamp
The launch of a $229 million mainland joint venture to produce spandex, an elastic textile material, will now stretch into next year as some partners, including Kiu Hung International Holdings, have not met their investment obligations.
The joint venture, Sangyang Spandex, was scheduled to start operations early this year but would now wait until late next year, said Lu Wenchang, general manager of Jiangsu-based Sangyang Textile, one of the mainland joint-venture partners.
Apart from Sangyang Textile, all the other partners have yet to make their capital contributions as set out in the joint-venture contract of December 2003, according to a statement posted by Kiu Hung on the Hong Kong stock exchange website.
The listed toymaker said it had so far contributed $14 million, or half of its investment commitment.
The four joint-venture partners are Kiu Hung, Sangyang Textile, Shanghai-listed Sinochem International Corp and Harvest City, a British Virgin Islands investment firm.
On April 19, Kiu Hung agreed to sell its entire 30 per cent interest in the joint venture to its parent, Kiu Hung International Holdings, owned by its chairman Joseph Hui Kee-fung. The transaction is subject to approval by shareholders on June 17.
Mr Lu said he hoped to halve Mr Hui's stake in the joint venture to 15 per cent, slash Sinochem's holding to 5 per cent from 25 per cent, and raise Sangyang Textile's interest to 67 per cent from 23 per cent.
'We're restructuring the joint venture because Kiu Hung didn't have the money to invest in it,' said Mr Lu, noting there 'was no problem with Sinochem' over such a move.
Kiu Hung's company secretary, Elvis Chan Kwok-yuen, denied this, saying the firm was reluctant to make its full investment because Sinochem and Harvest City had not honoured their investment obligations.
Mr Chan denied that Kiu Hung's losses were the reason why it did not make its full contracted investment.
The toymaker's net loss widened to $13.27 million last year from $4.61 million in 2003, while turnover fell to $80.7 million from $84 million.
The joint venture, located in Jiangsu province, will have an annual production capacity of 3,600 tonnes of high-grade spandex, said Mr Lu.
Some of the joint venture's spandex output will be sold to Sangyang Textile.
