Johnson Electric's focus on technology
Johnson Electric Holdings said it would rely mostly on innovative technology and new products to prop up growth this year as labour and raw material costs rise.
The manufacturer of motors, switches, medical devices and a host of vehicle components also said it would consider expanding in countries including India and Mexico to cut labour costs. It set up a factory in Guangxi early last year to take advantage of cheaper labour there.
Company chairman Patrick Wang Shui-chung said Guangdong province, the mainland's traditional manufacturing base, had not lost its glamour. 'Guangdong is close to Hong Kong and has good suppliers.'
However, he noted that in the financial year to March, the company's labour costs increased by more than 20 per cent.
Johnson Electric already operates in more than 20 countries and also set up a plant in Chennai, India, last year. 'We have plans to look into further investment there, as well as in other countries,' Wang said.
He was 'cautiously optimistic' about this year's performance, though the near-term operating environment presented a challenge. 'Although customer demand is presently holding up relatively well in the context of high oil prices and high unemployment in several western economies, we cannot expect a repeat of the 'recovery' effect on sales growth rates in the year ahead.'
The company's sales increased 21 per cent during the financial year, reaching US$2.1 billion. Net profit jumped 136 per cent year on year to a record HK$182 million.
'Johnson Electric is very focused on technology and new products, which is driving our sales in the market,' Wang said. 'That is the key driver of our business going forward.'
Johnson Electric attributed last year's increase to a recovery in demand from European and North American customers, and continued growth in emerging markets, particularly the mainland. However, Wang said the effect of high raw material costs, including copper and petrol, is 'requiring a significant effort to renegotiate prices and to drive for further efficiency gains'.
He said the firm would increase prices of some products 'by 5 to 10 per cent' to offset cost pressures.