The global landscape in 2021/22 was complex and volatile, with geopolitical tensions and a weak overall market and economy. In the first half of 2022, affected by supply risk concerns brought by the situation in Russia and Ukraine, international crude oil prices continued to rise, further pushing up plastic raw material prices. International shipping and supply chains have not yet recovered to pre-pandemic levels and the ongoing COVID-19 epidemic has also hindered economic recovery.
Due to the uncertain economic environment, customers remained cautious about placing orders and adopted low inventory strategies, which affected the overall sales volume of the Group. For the year ended 30th June 2022, the Group’s total turnover was decreased over the previous year.
During the year under review, the Group’s overall gross profit decreased, mainly due to the decline in overall sales volume. The gross profit margin decreased slightly as compared to the same period last year. Profit attributable to equity holders of the Company decreased, primarily due to the fall in turnover.
During the year under review, the turnover of the engineering plastic business increased. The gross profit margin fell modestly, and profit before income tax increased. The continued high prices of raw material have led some customers to actively seek alternatives. As engineering plastics are tailored for customers’ needs, they can be used to replace certain raw materials as well as to improve product performance, production capacity and efficiency. The pandemic has raised public awareness of infection prevention and hygiene, creating new opportunities for the Group. As such, the Group has flexibly adjusted its business scope, actively expanded its customer base and cooperated with local manufacturers to launch anti-epidemic products, which enabled it to secure orders from new local customers. At the same time, more companies are adopting flexible work-from-home arrangements. The change in people's living and working patterns has stimulated demand for general household appliances such as kitchenware, thus orders for household appliances and high-end kitchenware remained stable.
The Group's production and operation activities were partly affected by the anti-epidemic policy in Mainland China during the year, and its production capacity was not fully released. Turnover of the colorant, pigment and compounded plastic resin business decreased and the gross profit margin was also affected. Moreover, the strong US dollar pushed up procurement costs, which in turn resulted in a decline in profit before income tax. The colorant, pigment and compounded plastic resin business has, however, built a stable customer base in sectors such as automotive applications, food packaging and construction materials. Although the completion area of residential properties in Mainland China declined when compared with last year and the demand for construction materials softened, the Group believes that high-end sanitary products still have development potential, hence it will continue to develop related markets going forward so as to secure more orders with higher gross profit margins.
Turnover from the plastic trading business declined, mainly due to the slowdown in Mainland China’s economic growth in the first half of 2022, the slump in demand for raw materials from the traditional automobile and construction material industries, and the delay in international shipping during the year. As a result, customers adopted a prudent ordering strategy which has affected the Group's sales volume and led to a decline in turnover. The gross profit margin was basically similar to the same period last year. In addition, the Group has implemented a more cautious inventory provision estimation in view of recent economic uncertainties. As a result, profit before income tax decreased.
HUI Sai Chung