JOHNSON Electric Holdings says rising raw material costs and the strong yen will put pressure on its profit margin. But managing director Patrick Wang said after the annual general meeting he felt the company had the ability to improve the situation by raising the prices of its products, sourcing from places other than Japan and producing more components in-house. The world's second-largest micromotor manufacturer in June reported a disappointing 0.1 per cent growth in profit to $338 million, blaming soaring raw material costs and depreciation charges for the squeeze on profit margin. This was despite a 28.9 per cent increase in turnover to $1.9 billion. Mr Wang said the cost of copper had stabilised this year while steel would increase slightly. Last year, the price of copper jumped as much as 50 per cent and steel climbed 15 per cent. The company has hedged against the rise in copper and plastics. Mr Wang said inflation in Hong Kong and China exerted pressure on the profit margin but the company would seek to increase productivity to compensate. He expected it to achieve double-digit growth in sales this financial year. 'We foresee very strong demand for micromotors over the next few years,' Mr Wang said. To meet this demand, the company was spending $400 million annually to add production capacity to reach a total of one million motors by 1998 against present output of 650,000.' The outlook for business equipment and audio-visual products was particularly good, he said. 'The business equipment sector is expected to be a powerful vehicle for growth, continuing the trend set by a threefold increase in sales in this sector for the year 1994-95,' Mr Wang said. 'Audio-visual is another promising area and we are well placed for the Japanese market with our recent distribution agreement with Nippon Densan.' The growth of the Asian markets would be expressed in double-digits with some even doubling in terms of sales, he said. The company sought to sell more products to Japan, its fastest growth market. The company's investment portfolio holds about $1.3 billion, against $1.78 billion in March this year and $2.1 billion in March last year.