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Public company info - CHTC Fong's International Company Limited , 00641.HK

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CHTC Fong's International Company Limited, 00641.HK - Company Profile
Chairman Ye Maoxin
Share Issued (share) 1,100,000,000
Par Currency Hong Kong Dollar
Par Value 0.05
Industry Machinery & Equipment
Corporate Profile Business Summary: The Group is principally engaged in the manufacture and sale of dyeing and finishing machines, trading of stainless steel supplies and the manufacture and sale of stainless steel casting products. Performance for the year: For the year ended 31 December 2019 (the “Year”), the Group recorded consolidated revenue of approximately HK$2,663,000,000, representing a decrease of 23% as compared to approximately HK$3,472,000,000 for last year. Profit attributable to owners of the Company was approximately HK$169,000,000, representing an increase of 20% as compared to approximately HK$141,000,000 for last year. Basic earnings per share for the Year was 15.35 HK cents as compared to 12.82 HK cents for last year. Business Review MANUFACTURE AND SALE OF DYEING AND FINISHING MACHINES During 2019, the trade friction between China and the United States continued to intensify and the global economic environment was highly volatile, causing many customers to adopt a wait-and-see attitude on investment in production equipment. Meanwhile, the competition remained keen in the dyeing and finishing equipment industry, which inevitably affected the Group’s business. In addition, on 4 June 2019, a staff assembling event occurred in one of the dyeing and finishing machine production plants of the Group located at Longgang District, Shenzhen City. Through mutual understanding and negotiation between the Group and its staff, the staff assembling event was successfully resolved on 3 July and the plant has also resumed to normal production since then. Though the staff assembling event caused interruption on the production to a rather limited degree during the period, it did not have any direct material impact on the operating performance and the financial position of the Group for the Year. For the Year, this business segment recorded revenue of approximately HK$1,941,000,000, accounting for 73% of the Group’s revenue and representing a decrease of 28% from approximately HK$2,695,000,000 for last year. In particular, combined sales from Hong Kong and the PRC markets were approximately HK$1,082,000,000, representing a decrease of 12% from approximately HK$1,228,000,000 for last year; and sales from overseas markets were approximately HK$859,000,000, representing a decrease of 41% from approximately HK$1,467,000,000 for last year. Nevertheless, operating profit increased by approximately 69% to approximately HK$204,000,000 from approximately HK$121,000,000 for last year, which was primarily attributable to the recognition of income before tax of approximately HK$316,000,000 in the Year in respect of portions of the payment received from the urban renewal project of the land in Shenzhen (in the form of resettlement and demolition compensation) totalling RMB350,000,000 (equivalent to approximately HK$388,000,000), net of related costs of approximately HK$72,000,000, as the Group has started to relocate part of its production facilities from Shenzhen to Zhongshan in stages during 2019. The new production plant of the Group located at Linhai Industrial Park, Cuihang New District, Zhongshan City, Guangdong Province, which has been undertaking interior decoration and equipment installment by phases, has several production lines put into operation and is expected to be ready for use in mid-2020. Upon full operation of the Zhongshan new plant, the Group’s production capacity is expected to increase. The new Zhongshan plant will be keen on improving energy conservation and production efficiency, as well as applying more automated processes in its production process to shorten the production cycle and reduce manpower and management costs, and thus improve the Group’s operation efficiency. Since the outbreak of the novel coronavirus (COVID-19) in early 2020, the management has been monitoring the development of the epidemic and has taken timely actions and measures to protect the Group’s employees from being infected. The Group’s plants in Shenzhen and Zhongshan postponed the resumption of operations after the Lunar New Year holidays for a limited period of time to late February. The Group’s operations have not experienced any material disruptions. The management will continue to monitor the development of the epidemic and take appropriate measures when necessary. In order to cater to the future development of the textile printing and dyeing industry, the demand on automated production and the new trend of smart factories, the Group will continue to invest resources in enhancing the efficiency, as well as the functions of environmental protection, energy saving and automation of its dyeing and finishing machines so as to provide innovative energy-saving and eco-friendly equipment and solutions to customers, thus creating more value. The Group is committed to the research and development (R&D) of supporting intelligent dyeing and finishing equipment systems, mainly focusing on (i) central chemical measuring and dispensing system, (ii) central intelligent control system for printing and dyeing equipment, (iii) exhaust gas purification device and system for stenter frames, (iv) automated intelligent material handling system of textile fabrics and production supplies, and (v) computerised numerical controlled machining centre for core components required for the supporting systems. The development of intelligent equipment projects will not only bring positive impacts on the technological improvement, core competitiveness enhancement and improvement of the Group’s performance, but also play an important role in propelling industrial upgrading and technological advancement for the dyeing and finishing industry In 2020, the Group will move forward to: – enhance our R&D capability and create additional technical values to the Group’s products; – improve manufacturing capacity, persistently optimise manufacturing management and organisational structure, continuously innovate process technology, accelerate manufacturing automation, increase manufacturing efficiency and pursue better product quality; – strengthen cost management and control, and continuously optimise suppliers and supply channels; – standardise management processes, fine-tuning management system, boost management efficiency and reduce operating costs; – conform to market demands through offering more premium products and strengthen after-sales technical services; – explore new markets and sales channels to expand the Group’s customer base and market share of its products, thereby maintaining its leadership in the market; and – strengthen the development of talents and corporate culture. Looking forward, the Chinese government has proactively launched various economic reforms and innovative initiatives in recent years to propel domestic demand and promote requirements on “Environment Protection and Energy Saving” by encouraging technological transformation and upgrading in traditional industries to replace and purchase manufacturing equipment for capacity expansion. Those policies will have a positive effect on economic growth in the long run, and also provide new opportunities for the Group in the medium to long term development. The Board believes that the Group has laid a solid foundation for its mission to “become a world-class manufacturer of dyeing and finishing machinery”. By excelling ourselves and striving to continuously broaden product offerings for the Group’s customers, the Group strives for greater market share and develop us into a stronger and bigger group. TRADING OF STAINLESS STEEL SUPPLIES During 2019, the intensifying trade friction between China and the United States has clouded the global economic environment and had a negative influence on the stainless steel supplies market, which led to a decrease in sales of stainless steel supplies of the Group. For the year ended 31 December 2019, this business segment recorded revenue of approximately HK$216,000,000, accounting for approximately 8% of the Group’s revenue and representing a decrease of 18% as compared to approximately HK$262,000,000 for last year. Due to the decrease in revenue, operating profit for the Year amounted to approximately HK$6,000,000 as compared to profit of approximately HK$18,000,000 for last year. In respect of trading of stainless steel supplies, the Group has established strong relationship with some global leading steel manufacturing companies since commencing the business in 1988. As such, it is able to provide a diverse range of reliable and high-quality steel supplies to end-users, while procuring stainless steel raw materials for the Group’s dyeing and finishing machines business in a more cost-effective way. The Group will continue to adopt a prudent approach in running this business. It will take appropriate actions to mitigate market risks, adjust selling prices and inventory level appropriately and in a timely manner based on market analysis and its judgment, in order to improve the inventory turnover ratio while minimising the risk on price fluctuations. At the same time, the Group will strengthen the credit management of sales and trade receivables in order to lower the risk of bad debts and improve its cash flow. Looking into 2020, the price of stainless steel is expected to remain stable with slight fluctuations. The construction industry in Hong Kong is booming as more major infrastructure projects have commenced, which, coupled with the accelerated pace of urbanisation and infrastructure construction in the PRC, will provide opportunities for trading of stainless steel supplies. Therefore, the Group remains optimistic on the prospect of the stainless steel trading business. The Group will closely monitor and response to market changes to maintain steady growth in this business segment. MANUFACTURE AND SALE OF STAINLESS STEEL CASTING PRODUCTS The products of this business segment are primarily high-quality castings and machined processing parts made of stainless steel, dual-phase steel and nickel-based alloys that are widely used in industrial equipment in industries such as valves, pumps, chemical, oil and natural gas and foods, with customers principally hailing from Europe, the United States and Japan. For the year 2019, this business segment recorded revenue of approximately HK$506,000,000, accounting for 19% of the Group’s revenue and representing an increase of 2% as compared to approximately HK$494,000,000 for last year. Operating profit increased to approximately HK$83,000,000 from approximately HK$81,000,000 for last year. This business segment performed well as a whole with satisfactory growth in results. The Group will remain committed to promoting its production capacity through streamlined production processes and automatic machines as well as strengthening controls on production costs (including labour costs), thus to further improve the gross profit margin. The Group also implements sales strategies focusing on high-margin products in different businesses and related customer sectors. On the other hand, the Group has established a marketing centre in Atlanta, Georgia to expand its sales network in the United States, aiming for more orders and laying a solid foundation for sustainable and healthy development of this business segment. The Group believes that market demand for high-quality stainless steel casting products will continue to grow in the mid to long term. It is anticipated that, this business segment will maintain steady revenue growth and make sustainable contribution to the Group’s profit. ENVIRONMENTAL PROTECTION SERVICES This business segment principally engaged in operating kitchen wastes innocuous treatment projects and animal carcasses innocuous treatment projects in the PRC. Since January 2019, the kitchen wastes treatment plant of Taian China Science Environmental Engineering Co., Ltd.(泰安中科環保工程有限公司)(“CSEE”), located at the northern foot of Hama Mountain(蛤蟆山)in Taian City, has been taken over by the Environmental Health Management Office of Taian City(泰安市環境衛生管理處). The animal carcasses innocuous treatment facility of Taian CSCE Environmental Engineering Technology Co., Ltd. (泰安中科潔能環境工程技術有限公司)(“Taian CSCE”) resumed limited production after technological upgrade in September 2018. Due to environmental pressure, the facility had suspended operations for a period. After that, the facility resumed operations in April 2019 but had been operating on an intermittent basis. Due to the recent outbreak of COVID-19, the animal carcasses innocuous treatment facility has been closed after the Lunar New Year holidays. For the year ended 31 December 2019, this business segment recorded revenue of approximately HK$30,000, while the operating loss amounted to approximately HK$22,000,000. The Board believes that the current operating position of this business segment will not have a material adverse effect on the overall financial position of the Group. In early 2020, the Group had a meeting with relevant governmental authorities of Taian City to communicate on matters concerning the concession rights and business rationalisation of CSEE and Taian CSCE, seeking support from local government so as to resume normal operations of the business. The Company will consider disclosing updates on this business segment for any further development as and when appropriate. Prospects: Looking into 2020, the global economy is facing an array of uncertainties and the outbreak of COVID-19 is spreading rapidly around the world. The Board believes that 2020 will be another year of both challenges and opportunities. The management of the Group will closely monitor the development of the industry to capture the opportunities brought by technological innovation and the capacity expansion of the new Zhongshan plant, leverage on our advantages of scale, technology and talents, and implement the established development strategy to achieve sustainable and healthy development of the Group. Meanwhile, the Group will gradually divest non-core businesses such as environmental protection services and real estate investment in due course, concentrate resources to further optimise and streamline the corporate structure and comprehensively rationalise and consolidate its three core businesses. It will also actively develop its core businesses, vigorously expand the market and enhance the profitability of the Company so as to maximise value for the shareholders.

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