Huafeng Textile budgets HK$120m for new factory

Huafeng Textile International Group, a Fujian fabric processor, plans to spend HK$120 million to build a knitting plant as part of a drive to expand its upstream business.

The company expects that the new facility will contribute about HK$160 million in annual sales after completion in two years, according to company secretary and financial controller Sonny Li Mow-ming.

The new operation will not offer the same returns Huafeng gets from its main fabric processing business, which has a gross margin of 25 per cent. The new factory is expected to return 12 per cent.

'Our goal this year is to boost sales and earnings by entering new markets and launching a series of new products,' chairman Cai Zhenrong said.

Under its expansion plan, Huafeng wants to build a fabric manufacturing plant with the aim of generating up to HK$150 million in annual sales over the next three years. The plant is expected to be operational by the middle of next year.

Huafeng is also in the process of buying a mainland dyeing plant valued at HK$85 million. The management expects to complete the deal by the end of this month although it will not be fully reflected in the company's earnings until next year.

To help pay for the expansion, the company yesterday sealed a HK$250 million five-year syndicated loan with a group of six banks. Citic Ka Wah Bank and UOB Asia are the lead arrangers of the loan.

Separately, Huafeng executive director Cai Yangbo said the price of cotton had stabilised at about HK$14,000 per tonne. The company also spins cotton yarn.

Huafeng shares closed 1.06 per cent higher at 47.5 HK cents yesterday.