Spending on production expansion cut as earnings growth slumps to 10.3pc
Xinyi Glass Holdings, the mainland's largest exporter of vehicle glass, will cut its investment in production expansion this year and instead focus on researching energy-saving glass, its potential new product.
The reduction came after the Hong Kong-listed company posted a 10.3 per cent increase in net profit to $260.1 million last year, significantly lower than the 27.2 per cent posted in 2004 and 22.1 per cent the previous year.
The company attributed the slowdown in profit growth to the fact that its two new production lines in Dongguan, which commenced operations in the second quarter last year, had not reached full capacity.
It has budgeted $180 million for capital expenditure this year, significantly lower than the $744.3 million used last year and $537.6 million in 2004 when it aggressively expanded production facilities.
Capital expenditure this year will switch to researching energy-saving glass, which involves coating chemicals on glass to reduce heat penetration, and enhancing existing vehicle glass production, according to Xinyi chief executive Gerry Tung Ching-sai.
'We plan to build a research and development centre for energy-saving glass in our Dongguan factory in the second quarter this year,' he said.
'Energy-saving glass is a focus in the mainland's eleventh five-year plan.
'The central government may also give concessions to the glass makers,' Mr Tung said.
He said there was a 20 per cent year-on-year increase in contracts in the first quarter this year, driven by mainland carmakers recently listed in Hong Kong, including Geely Automobile and Dongfeng Motor.
Mr Tung expected vehicle glass export to remain the company's main growth driver.
Its export accounted for 61.1 per cent of the company's revenue last year, up from 55 per cent the previous year.
Xinyi had 37 per cent share of the mainland's vehicle glass export market last year, according to Mr Tung, compared with 36.2 per cent in 2004.
Vehicle windshield glass production reached 7.5 million pieces last year, doubling capacity since 2004.
Turnover rose 34.3 per cent to $1.38 billion last year.
Overall gross margin last year was 34.7 per cent, down from 36.3 per cent in 2004.
The company had $140.9 million cash at the end of last year, compared with $248.3 million in the previous year.
It proposed a final dividend of five cents per share for last year, unchanged from a year earlier.
Xinyi shares yesterday fell 0.96 per cent to close at $2.575.