In the second half of 2020, the COVID-19 pandemic continued spreading across the world and disabled global economies from returning to normal. However, stabilised oil prices and increased demand for raw materials became conducive to rising plastic material prices. Furthermore, with the pandemic brought under control and with the implementation of the inner circulation policy in Mainland China, the release of demand and resumption of production and exports grew faster than expected. As domestic consumption began to heat up, Mainland China’s economy posted gradual recovery. International capital inflows to Mainland China led to the Renminbi exchange rate’s appreciation. Riding on the boost from related short-term favourable factors, the sales performance of the Group’s customers gradually returned to normal and their orders increased. As a result, the Group’s business improved steadily.
In addition to the improved operating environment during the period, the Group effectively implemented the strategy of continuously optimising its product mix, exerting greater efforts in clearing inventory and streamlining costs.
Despite challenges during the period, domestic consumption was fully restored, driven by the inner circulation policy. Moreover, increasing public awareness to hygiene due to the pandemic outbreak boosted surging demand for post-pandemic products, such as medical devices and air filter systems, generating more orders for the Group’s plastic material trading business, and making it the most improved performer among three major businesses during the interim period. Apart from maintaining close ties with existing customers and continuously producing electrical appliances and traditional automobiles to bring stable orders, the Group also provided materials to the developers of smart products, household goods and high-end kitchenware to open up income sources. Rising oil prices resulted in growing demand for raw materials, thereby leading to increasing plastic material prices. Due to the Group’s effective reduction and control of inventory, inventory level has improved.
During the period under review, the work-from-home mode in different countries across the world that encouraged citizens to stay home and to go out less became the new normal, thus reshaping people’s way of living and driving up the continued increase in demand for general home appliances such as kitchenware. Facing changes in consumers’ consumption categories and habits, the Group’s export customers also changed their sales strategy and shifted to the export of high-end kitchenware, such as cooking utensils, coffee machines and ovens for baking cakes and bread, in order to explore new income streams. Meanwhile, the Group also flexibly modified its existing product portfolio to meet the huge order demand from customers. As a result, turnover of the engineering plastic product business grantly improved. Apart from maintaining its orders from internationally-renowned brands, the Group continued to enrich its product portfolio, leverage its business advantages, focus on promoting higher-margin products, and actively approach and engage in discussions with end customers, all in a bid to explore new income streams and expand its customer base. By capitalising on its industry experience of more than 50 years and excellent reputation, the Group is set to secure more orders and broaden its existing customer portfolio.
The pandemic has caused delays in the date of completion of various property projects. These delays, coupled with short-term demand for food packaging and basic necessities gradually returning to normal level, have led to a drop in the turnover of the colorants, pigments and compounded plastic resins segment during the period. However, with the rise in plastic material prices, its gross profit margin increased by 4.8 percentage points, while profit before taxation was maintained at a similar level as that during the same period in the previous year. With the market undergoing consolidation in which only competent enterprises are able to survive, small enterprises, engaged in low-end manufacturing businesses with relatively lower cost control ability and lower technical standards, have been acquired and phased out. In this regard, the Group will continue implementing its proven business strategies and centralise resources in the production of high-end sanitary and electronic products. It will also raise the production capacity of its factories to secure high gross profit margin orders and maintain stable business development.
HUI Sai Chung