UniSouth sees bright future in Europe markets
THE recovering global economy and soaring cotton prices promise a better year for the textile industry, according to UniSouth Holdings.
The textile manufacturer, the target of a takeover bid by the Dynamic Business Group, owned by Edward Kwok Wai-tak and his family, would continue to focus on the core business after the acquisition.
''Textiles are showing signs of recovery in Europe and the US. Now orders seem to be picking up,'' said UniSouth executive director Julian Wong Wai-chua.
''And the cotton shortage has made cotton suppliers increase the price. The higher the prices of material, the better off we are because the same profit margin in percentage will give higher profit in absolute terms,'' he added.
Cotton production in Pakistan, India and China has been falling since last year, according to Mr Wong.
He said the industry's down cycle was phasing out for an upward cycle, which was expected to last for three to five years.
Mr Wong said the company would focus on Europe as its main market.
''Europe has better potential because profit margins are higher there than in the US,'' he said.
Also, Europe being a nearer destination to the company's plant in Sri Lanka would mean lower shipment costs, he said.
Mr Wong said the company considered entering the Italian market with products from its new Sri Lankan plant as the Italy market did not have quota restrictions such as those imposed by the US.
The plant, which started its trial run in October last year, is one-third commissioned. Full operation is expected in April.
The plant has orders worth US$12 million on hand, to be fulfilled by June.
''Now we will concentrate on maintaining smooth operation of the new plant and cutting down production costs. The first six months to a year is critical for a new textile plant,'' Mr Wong said.
Europe accounts for 60 per cent of the company's turnover, with the remainder attributed to the US.
The firm's textile operation was free from any negative developments from Sino-US trade relations as it did not have a production base in China, said Mr Wong.
Although he would leave the company after the completion of the acquisition, he would continue to manage its textile business as executive director of the management company of Unisouth's textile operation, South Holdings.