Stella mulls relocating plants as costs climb
Rising costs on the mainland are driving Stella International Holdings to consider shifting production to other countries, the shoe manufacturer and retailer said as it posted shrinking third-quarter profit margins.
'In view of escalating manufacturing costs in China, we are in the process of identifying more cost-effective locations for the possible relocation of our production facilities,' the firm said yesterday.
Stella is expanding its Vietnamese production capacity to 10 million pairs of shoes by 2010 from 8 million this year. With a factory in Huizhou on the Pearl River Delta opening this quarter, annual capacity should reach 50 million pairs by year-end.
Stella's net margin fell 1.9 percentage points to 12.5 per cent in the third quarter from 14.4 per cent last year. Turnover grew 16.4 per cent to US$331.8 million, while net profit rose a much slower 1.3 per cent to US$41.5 million.
It was able to offset rising costs by increasing its average selling price 16.7 per cent in the quarter.
Last month, turnover rose 32 per cent to US$80.7 million while shoe shipments rose 13.4 per cent.
'The global economy has been greatly weakened by tighter credit and slender demand caused by the financial turmoil,' the firm said. 'Faced with such extraordinary challenges, [it was] able to achieve steady growth, thanks to value-added services and stringent cost control.'
North America and Europe made up 89.1 per cent of Stella's turnover.
Shoemaking accounted for 98 per cent of the firm's revenue. But Stella has a small yet fast-growing retail business. In the quarter, retail sales soared 157.7 per cent to US$6.7 million and retail operating profit rose 48.8 per cent to US$1.1 million.
Stella has stores on the mainland, in Macau, Taiwan and Thailand.
Its shares fell 3.24 per cent to close at HK$6.58 yesterday.
