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Carol Chan

Shanghai Prime Machinery, a major precision industrial components maker in the mainland, will more than double its capital spending this year to lift output capacity in order to meet rising demand and overseas sales.

The Shanghai-based company had set aside 550 million yuan for capital spending this year, up from last year's 230 million yuan, chief financial officer Wang Pin said yesterday after the firm reported a 71 per cent surge in net profit last year.

About 150 million yuan would be used for its numerically controlled machine-cutting tools project and the remainder would be used for its turbine blades and other businesses, Mr Wang said.

The company  was also looking for acquisitions  on projects that would yield an internal rate of return of at least 20 per cent, he said, adding that no formal agreement had been signed.

Shanghai Prime raised HK$1.45 billion from a Hong Kong initial public offering in April last year and its gearing ratio fell to 5 per cent  at the end of last year from 44 per cent a year earlier.

The company posted a net profit of 231 million yuan last year on turnover of 2.87 billion yuan.

However, its newly acquired fastener business was less profitable, dragging its gross profit margin by 7.4 percentage points to 18.2 per cent last year.

Gross profit margin of its fastener business, which it bought in December 2005, was about 9 per cent last year, compared with 33 per cent  for its turbine blades business and 25 per cent for its bearing  division.

Overseas sales amounted to 1.35 billion yuan,  up 722 per cent from 164 million yuan in 2005, mainly derived from its fastener business, which accounted for 82 per cent of the company's total overseas sales.

Revenue from its overseas markets, including the United States, Europe and Japan, accounted for 45 per cent of the company's turnover last year, compared with only 11.5 per cent a year earlier.



Shanghai Prime in 550m yuan capex exercise to increase output capacity