Hong Kong company reporting season

Techtronic Industries to power up plant expansion in China on back of record first-half earnings

PUBLISHED : Thursday, 18 August, 2016, 5:52pm
UPDATED : Thursday, 18 August, 2016, 10:28pm

Power tools giant Techtronic Industries (TTI) plans to ramp up expansion at its manufacturing base on the Chinese mainland to meet rising global demand for its products, following record-high earnings in the first half of this year.

“We have a large – more than two million sq ft – manufacturing facility in China that we’re expanding, and we’re investing like crazy,” TTI chief executive Joseph Galli Jnr told the South China Morning Post on Thursday, a day after the company announced its interim financial results.

“We have new automation and other innovation [to put in place],” said Galli, without providing the specific amount of the investment.

The company operates various facilities around the world, but its largest production complex is located inside the sprawling Asia Industrial Park in Dongguan, Guangdong province.

Employing more than 11,000 workers, TTI’s mainland facility is also home to one of its global research and development centres.

It churns out millions of devices for the construction, home improvement and floor care markets under various brands, including Milwaukee cordless power tools, Ryobi lawn mowers and Hoover vacuum cleaners.

Frank Chan Chi-chung, TTI’s chief financial officer, said the company expected its total capital expenditure this year to be around US$200 million, up from US$137 million last year.

TTI’s so-called infrastructure investment – one-off spending on property, plant and equipment – is expected to cost from US$20 million to US$25 million this year, Chan said.

He added that operating capital expenditure this year will range from US$170 million to US$180 million, including certain ongoing property, plant and equipment spending.

“Our strategy is to have new products contribute one-third of revenue every year,” said Chan, noting the importance of capacity expansion.

Interim net profit for TTI increased 11.6 per cent to a record US$177.03 million, up from US$158.69 million in the same period last year, on the back of strong sales at its power equipment and industrial businesses in all geographic markets.

Revenue rose nearly 9 per cent to a new high of US$2.69 billion from US$2.47 billion a year earlier.

TTI chairman Horst Julius Pudwill, who co-founded the company in Hong Kong in 1985, said gross margin – the difference between revenue and cost of goods sold – advanced to 36.1 per cent of sales, up from 35.6 per cent a year ago. “That marked the eighth consecutive reporting period of gross margin improvement,” Pudwill said.

But John Choi, an analyst at Daiwa Capital Markets, said TTI’s floor care and appliance business remained a drag on the company’s overall growth as first-half sales in that segment decreased 6.6 per cent year on year. An upcoming launch of new Hoover floor care robots lead fresh initiatives to improve that business, Choi said.