Car glass sales to drive Xinyi profit

PUBLISHED : Monday, 16 April, 2007, 12:00am
UPDATED : Monday, 16 April, 2007, 12:00am

Xinyi Glass Holdings, the only Hong Kong-listed glassmaker in the mainland to report profit growth last year, said vehicle glass would remain its earnings driver despite its expansion into other products.

Vehicle glass, which accounts for 64 per cent of Xinyi's overall business, would still comprise more than 50 per cent of sales, chairman Gerry Tung said.

Xinyi Glass has also expanded into the production of float glass, a raw material for vehicle and construction glass, to save on operating costs.

Demand for its glass products has been on the rise amid strong car sales in the mainland and the establishment of production bases in the country by leading foreign carmakers.

Xinyi Glass recorded 46 per cent of its sales in the mainland and 40 per cent in overseas markets such as Europe and North America.

China surpassed Japan as the world's second-biggest carmaker by selling 7.2 million vehicles last year, an increase of 25 per cent from 2005.

The China Association of Automobile Manufacturers estimated that vehicle sales could reach 8.5 million units this year.

Mr Tung said about 12 per cent of the world's vehicle glass was produced in the mainland, making the country the fourth-biggest producer. China exported 9.11 million pieces last year, with 33 per cent from Xinyi Glass, according to company figures.

Analyst Grace Mak at Merrill Lynch said the firm had earmarked HK$2.5 billion in capital spending up to 2009 to expand capacity.

The expansion would lead to an increase in the firm's debt-equity ratio from 11 per cent last year to 50 per cent in 2009.

Xinyi Glass reported a 49.3 per cent growth in net profit last year to HK$388.2 million, compared with a 65 per cent decline to 5.62 million yuan in underlying profit for rival China Glass Holdings.

Zhejiang Glass reported a half-year loss of 78.39 million yuan and has not yet released its full-year earnings report.

Luoyang Glass has reported losses for at least 10 years and its auditor, KPMG, warned in November last year that the company's future remained uncertain.