bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

authorLocations

authors

paywallTypes

corrections

sponsorType

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

WHILE Hong Kong companies are racing to join mainland companies in their China expansion programmes, Far East Aluminium (Holdings) has decided to separate from its joint-venture partner in Beijing.

  Far East Aluminium's chairman and managing director Richard Pang Shek-nam said the parting was not because of any disagreement with its partner, Beijing Door and Window Co, a division of Beijing Corp of Building Materials Industry.

  ''It is the market environment that has led to the dissolution of the joint venture,'' Mr Pang said.

 The joint venture, Beijing Far East Aluminium Works Co, was 51 per cent owned by Far East Aluminium. It was set up at the end of 1992 and started operation in March last year.

  Mr Pang said the venture had been established to capture growing opportunities for contracts in China arising from massive infrastructure and development projects in coming years.

  He said the company had hoped that a Chinese partner which was more familiar with the mainland market would help expand business in China.

  But the joint venture, which was positioned to serve mid-market customers, was not able to adapt to the market's demands.

  ''There are strong demands for high-end and low-end aluminium works in China, but not for middle-end products,'' Mr Pang said.

  ''People prefer either the lowest prices or the highest quality of products.''   He said it was difficult for the joint venture to survive in that environment because it targeted the middle of the market regarding price and quality.

    Since its establishment, the joint venture has undertaken only one small contract, which was awarded by the Beijing Corp of Building Materials Industry.

  The contract enabled the venture to last a few months more.

  Contrary to original plans, the venture not only failed to secure contracts, but also became a stumbling block for Far East Aluminium's efforts to get into the mainland market.

  ''Morally speaking, we are not supposed to undertake projects in Beijing directly because that would put us in direct competition with our joint venture,'' Mr Pang said.

    He said some potential contracts in Beijing had been offered to Far East Aluminium in the past year, but the company had rejected them.

  ''We tried to persuade the customers to give those contracts to our joint venture, but they would not do so. They want us to deal with them directly,'' he said.

  Because the joint venture was facing difficulties in staying afloat, the group and its partner reached an agreement last month to dissolve the entity. The dissolution was approved by the Beijing Corp of Building Materials Industry.

  With the dissolution, Mr Pang said Far East Aluminium was now free to tender and secure contracts in Beijing.

  He said the group had already secured a contract for the installation of aluminium works for the prestigious Beijing Tower development.

    ''The contract value is not very significant, in the region of US$300,000 and $400,000, but it signals a new stage of development for us,'' Mr Pang said.

  Far East Aluminium is not a newcomer in the China market. Its first big curtain wall project in China was for part of the construction of the Union Building in Shanghai in 1984.

  After the slump in the Hong Kong property market in 1983-84, the company shifted its emphasis to China and was awarded about 30 curtain wall, cladding, window and skylight projects in Beijing, Shanghai, Tianjin, Shenzhen and Xian between 1983 and 1987.

  With the revival of the Hong Kong property market from 1986 onwards, it focused its attentions on projects in the territory.

   In December 1991, the group was listed on the stock exchange.

  In a bid to take advantage of China's rapid economic growth, the company has decided to stage a comeback in the mainland market.

  Director Samson Pang Chi-chung said there was enormous potential in the aluminium works market in China because of massive infrastructure and construction projects.

  He said Shanghai would probably offer the most work opportunities.

   ''In our understanding, there will be 400 to 500 . . . new buildings . . developed in Shanghai over the next five years,'' he said.

  ''There are so many projects that we have to be very selective in pursuing tenders.''   Last year, Far East Aluminium secured contracts worth more than HK$600 million, of which about $250 million is related to projects in China.

  Its mainland contracts include the installation of aluminium windows and curtain walls for the Yantai International Financial Building in Shandong province and the Silver Capital Building, Regent Tower, China Merchants Building and Tai Xing Plaza in Shanghai.

  In Hong Kong, the company's contracts include installations for Dorset House, Laguna City, Hong Kong Industrial Technology Centre and Concordia Plaza.

  However, net profit at Far East Aluminium plummeted 90 per cent to HK$3.2 million for the year to December because of difficulties facing the construction industry.

  The dive in profit was caused by depressed profit margins for projects secured under fierce competition and the financial costs of expanding into China.

    Mr Samson Pang said 1993 was a critical year for the company, but said the worst was over.

    ''Contracts on hand were secured at reasonable profit margins. I am confident that our business will have a satisfactory harvest this year,'' he said.

  He expected to see steady business growth in coming years, particularly with the company's expansion into China.

  Besides contract work, the group is engaged in two joint-venture property developments in Guangzhou and Beijing.

  The company's involvement in property development was a strategy to better position itself in securing aluminium works contracts in China, according to Mr Richard Pang.

  He said it would not overexpose the company in the property development business.

  The group has already realised an exceptional gain of about HK$24 million from the disposal of interests in Citicorp Centre in February.

  Analysts said the share price of Far East Aluminium had been trading at depressed levels for a long time.

  The profitability of the company appeared to have bottomed out, and the stock was likely to see a recovery, particularly with improved market conditions in the construction industry.



Far East Aluminium goes it alone