Saturday, November 26, 2022
 
Columnist
Martin Hennecke
 
SHUANGHUA H
HKEx Stock Code : 01241 
 
Corporate Profile
Principally engaged in design, development, manufacture and sale of parts of auto air-conditioner.

Business Review - For the year ended December 31, 2012

In 2012, as the auto manufacturing industry experienced a slowdown in growth in tandem with the decline and slowdown in domestic demand amid generally lacklustre macro-economic conditions, upstream suppliers of auto parts and components were also subject to slower growth and a decline in results. As a result of the aforesaid and coupled with the impact of shrinking domestic and overseas markets as well as the pressure of RMB appreciation, the Company reported a substantial decrease in profit for 2012.

For the year ended 31 December 2012, the Group's operating revenue amounted to approximately RMB379.6 million, representing a decline of approximately RMB149.0 million or approximately 28.2% from that for the same period of last year. Net profit amounted to approximately RMB21.8 million, a decline of approximately RMB37.2 million or approximately 63.0% comparing to the same period of last year. In respective to product segments, the revenues of evaporators amounted to RMB126.7 million, condensers amounted to approximately RMB102.3 million and heaters amounted to approximately RMB24.1 million and compressors amounted to approximately RMB61.5 million. In respective to market segments, the total revenues are approximately RMB210.3 million and approximately RMB169.3 million for domestic and international markets respectively.

Sales to Domestic Market

For the year ended 31 December 2012, our sales volume to domestic market of evaporators, condensers and heaters fell by approximately 17.1%, 38.7% and 31.1%, respectively comparing with that of the corresponding period of 2011, owing to weak sentiments in the domestic automotive market and intense market competition. For the year ended 31 December 2012, average selling prices basically remained stable over the same period of 2011. Decrease in sales volume led to year-on-year decrease in revenue from sales to domestic market of evaporators, condensers and heaters of approximately 19.5%, 36.3% and 33.1% respectively.

Other products sold to the domestic market comprised primarily self-manufactured oil coolers, intercoolers and aluminium waste.

Sales to International Market

Our sales to international market are primarily sold to the North American market. For the year ended 31 December 2012, the Group's revenue from sales to international market of selfmanufactured evaporators, condensers and heaters fell by approximately 9.7%, 23.0% and 22.3%, respectively, over the same period of 2011. As unfavourable conditions continued to prevail in the international automotive market, the Group sought to increase sales by lowering prices, in a bid to prevent shrinking demand in the international market. For the year ended 31 December 2012, average selling prices of self-manufactured evaporators sold to international market fell by 10.4%, over the same period of 2011 with sales volume basically remained flat as compared to the same period of 2011. There was a decrease by approximately 21.8% and a decrease by approximately 19.7%, respectively, over the same period of 2011, in the international sales volume of the Group's self-manufactured condensers and heaters with their selling prices in international market basically remained unchanged.

For the year ended 31 December 2012, the Group's revenue from sales to international markets of self-manufactured compressors went up by approximately 8.7% over the same period of 2011. We commenced production and sales of compressors in 2010, which were all sold to international markets. Our production and sales of compressors had been gradually increasing as we started large-scale production in 2011 and continued through 2012. For the year ended 31 December 2012, the international sales volume of our self-manufactured compressors recorded an increase of approximately 13.2% over the same period of 2011 and its average selling price in international market fell by 4% over the same period of last year.

For the year ended 31 December 2012, the Group's revenue from sales to international markets of trading compressors fell by approximately 65.6% over the same period of 2011.

Our trading compressors were all sold to international markets. For the year ended 31 December 2012, international sales volume of our trading compressors recorded a decrease of approximately 67.6% over the same period of 2011. Sales of trading compressors substantially decreased mainly because the main trading compressors supplier of the Group, has started carrying out its own compressors selling business since 2012, and thereby we substantially reduced our purchase of compressors from this supplier.

Other revenue from sales to international market comprised primarily oil coolers, intercoolers, liquid-gas separators, evaporators and condenser cores, pipes and thermostats.

Business Outlook - For the year ended December 31, 2012

While the growth rate of China's auto manufacturing industry has declined substantially in recent years, the industry has remained in a growth cycle with untapped market potentials. China's auto manufacturing market is undergoing transformation and structural adjustment, as competition is increasingly based on services and brand competition. There is a growing trend of consumption for upgrade purposes in the auto industry, where market demands are dominated by high quality, customised and low-energy consumption models. According to the statistics of the National Bureau of Statistics, China's private automobile ownership in 2012 was in excess of 93 million vehicles, while increasing opportunities in the after-sales market are anticipated under the nation's macro-economic control measures, new laws on taxation for vehicles and vessels and the “Three Warranties” policy for automobiles were scheduled to come into effect on 1 October 2013.

To address changes in market demands, the Group will enhance its competitiveness in the three areas of products, R&D and business. The Group will make vigorous efforts to adjust its product mix and step up with product upgrades and the introduction of new-generation models, striving to expand its market and increase its profit. The Group will also secure higher added value for its products by increasing investment and enhancing its R&D capabilities to improve the quality of its products and the efficiency of its services, so as to facilitate sales to major international brands. The Group will focus its efforts on the Original Equipment Manufacturer (“OEM”) market and the After-sale Maintenance (“AM”) market, with special emphasis on building sales networks in the domestic after-sales market so that it will benefit from market-oriented, large-scale operations. The Group will continue to leverage its access to the capital market, actively identifying opportunities for acquisitions, investments, joint ventures or strategic alliances in a bid to drive its strategy of vertical as well as horizontal expansion.

As the Group's business of self-manufactured compressors with fixed discharge volume has been incurring losses amidst the dwindling markets in Europe and the North America and the overall doldrums for the industry, the Group has plans to modify the mode of operation of Shuanghua Machinery, a subsidiary engaged in the production and sales of compressors, with a view to profit turnaround in future. In response to market changes, Shuanghua Machinery will relocate with reduced fixed asset investments and downsize the excess production capacity of compressors with fixed discharge volume to save costs. Investment in compressors with variable discharge volume will also be slowed down and efforts are underway to identify an optimal model for its operations.

The Board announced that Hong Kong Automart, a wholly-owned subsidiary of the Company, had entered into a memorandum of understanding on 4 December 2012 with Great Wall Motor Co., Ltd. (長城汽車股份有限公司) containing, amongst others, their intention to discuss on certain business opportunities. Such business opportunities include the potential disposal (the “Potential Disposal”) by Hong Kong Automart of its equity interest in Macs (Boading) Auto A/C Systems Co., Ltd. (麥克斯(保定)汽車空調系統有限公司). Both parties agreed to proceed with the discussions and negotiations in respect of the Potential Disposal, and final terms and conditions will be confirmed upon signing of definitive agreement (if entered into).

As at the date of this report, no legally binding agreement or whatsoever in relation to the Potential Disposal has been entered into and there is no assurance that any legally binding agreement will be entered into or the Potential Disposal will be proceeded at all.

Source: Shuanghua Holdings (01241) Annual Results Announcement
Chairman Zheng Ping Issued Capital (shares) 650M
Par Value HKD 0.01 Market Capitalisation (HKD) 218M
 
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