Vtech Holdings said rising wages and currency appreciation on the mainland were to blame for declining profit in the six months to the end of September.
Vtech, which bills itself as the world's largest cordless phone maker and sells its products mainly to the US and Europe, said net profit for the interim period fell 5.4 per to US$88.5 million, down from US$93.6 million a year earlier.
This was despite an inverse 5.4 per cent increase in revenue, which rose to US$858.1 million between April and September.
'Higher raw materials prices were compounded by further wage increases in China and renminbi appreciation. These factors pressured gross margin and resulted in lower profit,' management said yesterday in a stock exchange announcement.
Vtech's problems are representative of the challenges confronting foreign firms exporting from the mainland, where rapid wage inflation and a slowly but steadily rising currency have been the norm in recent years.
The average monthly income of mainland migrant workers rose to 1,991 yuan (HK$2,437) in the third quarter, up 20 per cent from 1,659 yuan during the same period a year ago, according to National Bureau of Statistics figures accessed from data provider CEIC.