WKK H1 EMS Sales Up, New Factory in Ganzhou
Published: 18 September 2008
by Mike Buetow
Inventories rose HK$121 million year-over-year to HK$178 million. Cash from operations was HK$99 million, down from HK$204 million last year.
EMS sales rose 18% in the first half, but operating profits fell 5% on currency appreciation, higher oil prices and escalating wages in China. Those factors will lead to flat sales and lower profitability for the second half, WKK predicted. “Orders are expected to be maintained at roughly the same level, [but] profitability is expected to fall short of that of last year mainly because of the appreciation of the Renminbi and escalating wages in the PRC.”
WKK Technology, the EMS division, did HK$2.4 billion ($308 million) in EMS sales in 2007.
To mitigate the lower EMS profits, the company is building a factory in Ganzhou, Jiangxi, about five hours north of Shenzhen. Chairman Senta Wong said wage inflation and regulations in Guangdong Province and the exodus of companies to Vietnam, India and inland China are behind the move. “We have to make a move (in order) to compete,” he said.
The company will maintain its factory in Dongguan, where it will handle high mix parts. The new factory will produce higher volume product.
“We will maintain a low volume, high value product in Dongguan, while lower value, higher volume product will be moved to the new plant,” Wong said.
2008 has been a difficult year, Wong said, and the first three quarters of 2009 will also be difficult. The coming year “will depend on the US economy and Europe, which is not in good shape right now.”
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