Hualing loan to expand parts venture
RED-CHIP household electrical appliances manufacturer Hualing Holdings yesterday signed up for a transferable loan facility of US$20 million to expand its production.
Managing director Bi Qing said this would enable the company to be more self-reliant in the production of air conditioner parts.
Mr Bi said the company was concerned about the rising yen, and in order not to be hard hit by the strong currency, it had to reduce importation of Japanese parts.
Of the loan, $12.6 million would be used for the newly established joint-venture, Guangzhou Mitsubishi Electric - Hualing Compressors.
Production is expected to start early next year, ensuring the company a steady supply of compressors at a preferential price.
Material costs make up 70 per cent of total costs of air conditioners and imported materials (50 per cent coming from Japan) constitute 42 per cent.
But since Mitsubishi Electric had offered a 10 per cent cut in parts prices in the wake of the yen's rise, Hualing had to be able to reduce any impact to a minimum, Mr Bi said.
The loan facility carries a three-year maturity at 1.5 per cent above the London Inter Bank Offered Rate (Libor) and was arranged by the Sumitomo Bank.
After the first 11/2 years, Hualing is to make repayments in four installments of US$5 million.
A company spokesman said a recent profit survey of household appliance firms placed Hualing at the top.