TOY maker Harbour Ring will enjoy steady growth in toy sales following an improvement in retail sales in the United States and the settlement of China's Most Favoured Nation trading status.
The company is principally engaged in original equipment manufacturing of toys and accessories. Electronic toys carry the highest net margins at 20 per cent, followed by plastic toys at 15 per cent. Premium items used for promotional purposes have the lowest margins at 10 to 12 per cent.
Harbour Ring's production facilities are primarily located in China's Guangdong province and Macau.
Although accounting for only 20 per cent of the company's total production capacity, the Macau factory represented more than 75 per cent of total Macau toy exports in the first half of 1993.
Since these products originated from Macau, they are exempt from European Community quotas. The capacity of the Macau factory is expected to increase 50 per cent by the end of the year.
In 1988, Harbour Ring derived a significant portion of its earnings from producing Ninja Turtles toys for Playmates, boosting its earnings tremendously in the early 1990s.
But a poor performance in 1992 saw turnover slump by 15 per cent and earnings by 36 per cent. However, in 1991 Harbour Ring started to diversify its product base and customer base.
The company is also involved in new design, redesign and repackaging activities, responding to rapidly changing market demands in order to strengthen profit margins and establish better price controls.
Last year, the company spent $17 million on expansion, and upgraded its manufacturing facilities in Hong Kong, Macau and China.
Harbour Ring has been involved in the property business since 1992. Its properties in Hong Kong are almost sold and will be booked in this financial year. Other projects in China will be booked gradually between 1994 and 1998.
The company's 1994 earnings are expected to be raised by the disposal of several properties, such as Fortress Tower in Fortress Hill and Canadian Garden in Shanghai.
Despite these successful projects, the company has stated that it has no intention to shift away from its core business as a toy manufacturer/distributor.
Therefore, income from property does not amount to more than 10 per cent of total earnings and the company is unlikely to enter into any new projects in the near future. Brokerage DMT Securities forecasts the company will register 40 per cent net profit growth to $326.6 million in 1994.