Fittec International Group, a maker of printed circuit boards for computers, said a recovery of demand for motherboards would help support earnings despite a falling margin because of higher labour and production costs. The company, which last week posted a 46.3 per cent decline in net profit, is expanding capacity and relocating production bases to get ready for increased orders, according to company management. Guangdong-based Fittec, which last year leased a production plant in Suzhou, Jiangsu province, will move the facilities to a piece of land in the city it bought for HK$16 million in July this year. It is also relocating production facilities in Futian and Fuyong, Guangdong province, to a 72,600-square-metre plant it leased in August last year in Guangdong's Shajing city. However, the company is facing higher labour costs, including an increase of up to 20 per cent for minimum wages in Shenzhen, said chief financial officer Michael Cheung. Production costs would also remain high, according to the company's executive director Zola Sun, because the company must use non-lead material to meet a new European Union requirement known as Restriction of Hazardous Substances (RoHS). Ms Sun said the RoHS, which came into effect in July last year, had hit all electronic manufacturers and expected the industry to raise product prices. Higher production costs dragged Fittec's gross profit margin down 4.6 percentage points to 8.4 per cent for the year to the end of June. As a result, net profit dropped 46.3 per cent to HK$89.16 million for the year to the end of June. Total sales rose 10.8 per cent to HK$1.99 billion for the financial year 06-07 with hard-disc driver controllers accounting for 67 per cent of sales. Japanese electronics company Toshiba was the company's biggest customer, accounting for 73 per cent of the sales. Shares of Fittec, which have fallen 57.7 per cent in the past 12 months, fell 6.75 per cent on Thursday to 69 HK cents, after the release of the earnings announcement.