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Amanda Lee

Shenzhen-based sofa manufacturer Man Wah Holdings, which floated its shares yesterday on the Hong Kong stock exchange, is still bullish on its export business to the United States this year even though the yuan is expected to appreciate marginally.
The pressure this year would stem mainly from the rising cost of raw materials, executive director John Li Jianhong said. 
Exports account for 70 per cent of the company's revenue. 
The firm had to trim its offering by almost half, to HK$1.64 billion, by selling fewer shares at a lower offer price. It also had to delay its listing. 
Its shares fell below its offer price of HK$6.80 yesterday, closing at HK$6.70 on its debut.
Francis Lee Fook-wah, Man Wah's financial director, said the reduced offering should have little impact on Man Wah. 'We will cut back on what we planned to spend on and we'll use our working capital if it's necessary,' Lee said.
According to its listing prospectus, as of 2008, it had 2.6 per cent of the market share in the US for recliner sofas, which have features such as extending foot-rests and swivel functions.
Revenue from the US for 2007 was HK$201.67 million. It was HK$514.21 million in 2008 and reached HK$777.41 million in 2009.
Li said one advantage Man Wah had over its competitors, such as top recliner sofa seller La-Z-Boy, which has a 21.3 per cent market share in the US, was that its products had been priced 30 to 40 per cent lower, largely because they were manufactured on the mainland.
La-Z-Boy manufactures sofas in its factories in the US and has more than 60 furniture stores. 
'We don't run retail stores in the US and our team there will speak to distributors directly, making sure they are getting what they want,' he said. Not having many employees or any retail stores in the US was crucial to keeping costs low, he said.
Li said Man Wah raised its prices on exports to the US three times back in 2007 and might consider raising them  this year, depending on leather and wood prices, the two main components driving manufacturing costs. The company will be raising prices next month  by 5 per cent on the mainland where it will spend the majority of the net proceeds to expand retail operations and production capacity.
Stephen Allen Barr, executive director and president of Man Wah USA, now leads a team of 19 responsible for sales and marketing for North America, where Man Wah has had substantial growth in sales of 'Cheers' recliner sofas.
Barr has said that Man Wah's recliner sofa design appeals to women, who make decisions on what to buy in typical US households.
In China, actor Sun Honglei has been selected to front Man Wah's marketing campaign for recliner sofas because, according to surveys, he is a popular male celebrity among women on the mainland.
'Men just pay for things as long as the women like them,' Li said.
Man Wah has yet to find a formula that will win over the fashion-savvy customers in Europe, where its revenue is lagging behind the US and China.
'Recliner sofas have not been as popular in Europe compared to other markets,' Li said. 'People there are more reserved in taste. We have been working with design teams in Italy and hope to offer them the same service they expect from local brands.'
Growth of sales in Europe  narrowed  to 17.8 per cent  to HK$348.61 million for the year ended March 2009 from  the previous year's 20.6 per cent and sales of  HK$317.7 million. 
Man Wah, which was listed in Singapore between 2005 and 2009, spent four years building its business in the US before coming to Hong Kong for a listing. 
We had wanted to list in Hong Kong, being a Shenzhen-based company,' said Li.
'But we needed the capital to grow our business and at the time, the company was too small to have a listing in Hong Kong.'



Sofa maker still sitting pretty, boss insists