Shanghai textile firm beats forecast

SHANGHAI No 2 Textile Machinery, one of the nine Shanghai stocks with B shares, has recorded profits sharply higher than it had forecast.

Vice-chairman and general accountant Xu Zhijiong said after-tax profit for the year ended December 31 would be about 110 million yuan (about HK$148 million), nearly 72 per cent higher than the projection of 64 million yuan.

He said the earnings were based on a profits tax rate of 15 per cent granted to shareholding enterprises.

Profits tax for mainland enterprises is normally 33 per cent.

Mr Xu said earnings per share would be about 36.8 cents.

In the 11 months ended November 30, Shanghai No 2 Textile reported a 131 per cent rise in pre-tax profit to 117.97 million yuan, and turnover jumped 75 per cent to 687.7 million yuan.

Pre-tax profit for the full year was expected to reach 135 million yuan and turnover would be around 750 million yuan.

The value of exports would rise 43 per cent to US$28.5 million.

Chairman Zheng Keqin said the growth last year was the biggest in the company's history.

''Such a big profit rise is directly attributable to the transformation into a shareholding system,'' he said.

Shanghai No 2 Textile was transformed into a shareholding firm last March with the issue of A shares, followed by the issue of B shares in June.

Mr Zheng said the transformation substantially improved the group's efficiency and profitability.

''Being a shareholding company, we do not rely on the government, but on ourselves. In the past, we were accountable to the state. Now, we are accountable to our shareholders,'' he said.

Although figures are not finalised, the group has mapped out strong forecasts for the next few years.

It expects to see a 30 per cent rise in profit this year, with turnover expected to reach 880 million yuan.

It is predicted that profit will rise to 220 million yuan in 1995, with a projected turnover of up to 1.5 billion yuan.

Mr Zheng said Shanghai No 2 Textile would strive to diversify and expand internationally in the years ahead.

He said the company was studying the possibility of setting up a plant in Indonesia and a maintenance centre in Thailand, in a bid to increase its presence in Southeast Asia.

The group would also consider future listings in Hongkong and elsewhere, including the possibility of an American depository receipts (ADR) listing in the US, he said.

The firm is upgrading its Shanghai textile machinery, and establishing new plants in Pudong to produce automatic cone winders.

Mr Zheng said it had installed advanced technology from Germany to help it compete with Japanese and Italian manufacturers.