Yip's boss paints rosy picture of future growth
Yip's Chemical, which manufactures solvent, coating and lubricant products, aims to double sales of its coating products by 2014.
Robert Young (pictured), executive director, said household paints would be one of the company's growth drivers. A boom is expected in the household paints market as the central government has pledged to build 10 million affordable homes this year.
Yip's also plans to boost the distribution network of Bauhinia, a middle-end household paint product, from about 1,500 franchise stores to 3,000 by 2015, with a focus on second- and third-tier mainland cities.
The company has budgeted HK$700 million for capital investment this year, most of which will go into new production plants. These include a 22-hectare plant in Jinshan, which will add 280,000 tonnes of coating capacity to the company.
Yip's will also increase the production capacity of solvent products from 300,000 tonnes to 600,000 tonnes this year and to 900,000 tonnes by 2014.
Young said the expansion projects should further push up the firm's gearing ratio, which reached 14.9 per cent last year, according to its annual report. He said the company had agreed on a ceiling of 50 per cent in gearing ratio, and that it did not have any plans to issue new shares to raise capital.
It is important for the company, Young said, to increase the production scale amid an increase in costs and a narrowing margin.
Yip's reported HK$264.5 million of net profit last year, down 21 per cent from 2009 despite a 28 per cent increase in sales volume.
'We expect the whole coating industry in the mainland to undergo a cycle of consolidation and expansion in the next five to 10 years as smaller businesses drop out because of an increase in production costs and narrowing margin,' Young said. 'The whole industry is very fragmented. In the house paints market, for example, we are now the fourth-largest market player. The No3 player, however, only takes less than 6 per cent. There is huge room for growth.'