Shanghai Yaohua Pilkington Glass has announced that its net profit fell 24.1% to US$ 23 million in 1995 on the back of a slowdown in China“s construction industry, rising costs and a higher tax rate….
Shanghai Yaohua Pilkington Glass has announced that its net profit fell 24.1% to US$ 23 million in 1995 on the back of a slowdown in China“s construction industry, rising costs and a higher tax rate. One of the leading firms on the Shanghai “B“ share market, Shanghai Yaohua, a joint venture part-owned by Britain“s Pilkington Glass, is likely to experience further tough times this year. In fact, Shanghai Yaohua has announced that it expects lower profits in 1996 because of excess domestic supply of glass, intensifying competition and falling prices. Gui Xintian, secretary to the general manager, said that he could not give an estimate for 1996 net profit but that it would definitely fall from the actual 1995 figure of US$ 23 million, using international accounting standards. “The future will be tough,” he said. “Earnings will be flat in the next two years.” Prices for high-quality glass have fallen 30% in the last three months. Mr. Gui also said the company sold its high-quality glass in 1995 for 3,400 yuan a tonne in the domestic market and $315 FOB in export markets, mainly Japan, Hong Kong and South Korea. Demand has slowed in China because of a national austerity programme and a glut in the property market, he added. At the same time, glass production capacity has increased, with two more large plants to open over the next 12 months, one of them a Taiwan-invested venture in Kunshan in Jiangsu province due to start production in September. Mr. Gui stated that Shanghai Yaohua planned to produce 240,000 tonnes of glass in 1996, up from actual 190,000 in 1995. The central government has approved Shanghai Yaohua“s plan to install a third production line but the company has not yet decided when to proceed. He said a devaluation of the yuan would be good for Shanghai Yaohua in helping its exports. Stiffer competition in the high-quality float-glass market had also led to lower prices and lower margins, while weak demand locally forced the venture to look to lower-margin exports, allocating 60% of production abroad against 50% in 1994. Turnover was 646.4 million yuan, up just 2.8% over the year before. Shanghai Yaohua Pilkington has a stake in two of China“s existing five high-quality float-glass facilities. More plants are expected to come onstream in the near future.