HENRY TAN
Henry Tan listed his company, Luen Thai Holdings, on Hong Kong's main board in July last year, betting on a huge boom in garment exports from China after global textile quotas ended on January 1.
After raising $669 million from the initial public offering on July 14 last year, the 51-year-old chief executive aggressively expanded the firm's garment factories in China, aiming to boost its mainland production share from 25 per cent last year to 50 per cent next year.
Since then, Luen Thai has been the largest Hong Kong-listed garment maker, with annual revenue topping US$500 million, mostly from US and European sales.
Luen Thai has come a long way since Mr Tan's father, Tan Siu Lin, started a garment factory on the Pacific island of Saipan in 1983.
But Luen Thai's IPO prospectus sounded a warning: 'If new quotas are imposed, particularly by the US, the company may have to slow down geographic consolidation and expansion of its operations, and its business may be harmed.'
The warning turned out to be painfully true.
After global textile quotas ended on January 1, exports of Chinese garments to the US and European Union surged, some categories registering triple-digit annual growth.
In alarm, the US and European Union imposed 'safeguard quotas' on various categories of Chinese garments, using a World Trade Organisation clause permitting such quotas on goods deemed to cause 'market disruption'.
'The imposition of safeguards by the US and EU has affected not just the company but the entire apparel industry. The uncertainty is bringing lots of negative sentiment from customers who do not want to place orders with China,' Mr Tan said.
In the first half, Luen Thai's turnover fell just over 1 per cent to US$267.48 million and net profit slid 4.6 per cent to US$12.5 million. Kim Eng Securities predicted Luen Thai would achieve, at best, low single-digit organic sales growth this year.
The firm debuted on the Hong Kong stock exchange at $2.975 per share on July 14 but was down to $2.15 at the close on December 19.
Luen Thai is a classic casualty of being in the cross-fire of international trade wars.
