Sino-British joint-venture Shanghai Yaohua Pilkington Glass, is having to tackle a drop in glass prices. The company, in which Pilkington International Holdings has a minority stake, built its fortun…
Sino-British joint-venture Shanghai Yaohua Pilkington Glass, is having to tackle a drop in glass prices. The company, in which Pilkington International Holdings has a minority stake, built its fortunes on advanced technology that other firms in China have since emulated, and on a construction boom that has largely faded. One analyst said profits this year were expected to fall sharply to possibly around RMB 120 million (US$ 14.46 million) from RMB 263 million in 1995 and a company spokesman said this estimate was fairly close to the company“s own projections. In its interim earnings report in August, Yaohua Pilkington reported first-half profits of RMB 8.83 million , or 11.14% of the target it had set. “Business is not good this year, mainly because the competition is very tough,” said Jin Minli, head of the company“s general management office. “The fall in the price of glass products has had a significant effect. In the first half of this year alone, prices for our glass products fell more than 30%,” Jin said. Up to late last year, Yaohua Pilkington had the only production facilities in China for producing glass of a thickness less than 12 mm. Three other companies have since come on line with the same capability. Exports are not promising either, due to capacity expanding in Indonesia and South Korea. Last year the company sold 60% of its output overseas. Overall, however, China“s construction industry is expected to benefit from the central bank“s decision to cut interest rates in May and in August this year. Yaohua Pilkington“s Jin said the company was hopeful of a turnaround in 1997 but, in the meantime, it has suspended plans for a third production line until market conditions improve. As regards the 22-company cartel set up in September to raise prices, Yaohua Pilkington said it would benefit from such moves even though it is not part of the alliance. “Chinese glassmakers do not operate in a vacuum, but as a sector. Any changes in the market will undoubtedly affect all the parties involved,” company secretary Gui Xintian said. “Our products are usually three yuan more than the state-owned products, so when their product prices are kept above a minimum, so are ours,” Mr Gui added. The state-owned glassmakers sell to the mass market while Yaohua aims for the upper end of the market.