Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
NATURE FLOOR
HKEx Stock Code : 02083 
 
Corporate Profile
The principal activities are the manufacturing and sale of flooring products as well as the trading of timber and flooring products.

Business Review - For the year ended December 31, 2012

1. The flooring business

The Group's flooring products are mainly laminated flooring, solid wood flooring and solid wood engineered flooring. For the year ended 31 December 2012, the Group sold a total of 17,733,000 square metres (for the year ended 31 December 2011: 23,839,000 square metres) of the above major flooring products largely due to the sluggish sentiment of the Chinese real-estate and flooring consumer markets, representing a decrease of 25.6%.

In respect of manufacturing, the revenue on trademark and distribution network usage fees generated from the Group's authorized manufacturing operations accounted for 15.7% (for the year ended 31 December 2011: 13.4%) of the Group's total revenue.

In respect of its flooring store network, the Group had a total of 3,269 (31 December 2011: 3,202) flooring stores as of 31 December 2012. Of the total number of stores, there were 2,044 (31 December 2011: 2,038) ¡¥¡¥Nature'' stores, 1,009 (31 December 2011: 1,001) ¡¥¡¥Nature ¡E No. 1 My Space'' stores, 167 (31 December 2011: 163) ¡¥¡¥Nature ¡E Aesthetics'' store. Although flooring business witnessed a decline during the reporting period, the Group maintained a sound sales network as the total number of flooring stores recorded a steady growth slightly as compared to last year.

2. The businesses of wooden doors and wardrobes

The business of wooden doors and wardrobes is one of the prioritised businesses of the Group. By leveraging the brand recognition of ¡¥¡¥Nature'', the Group created two brands, namely ¡¥¡¥Nature Desenberg'' and ¡¥¡¥Nature Vanessa'' to further tap into this business. In respect of its wooden doors business, the Group has established wholly owned subsidiaries in Xuzhou city of Jiangsu Province to manufacture wooden doors products in leased plant during the period, which has commenced production in the first half of the year. As of 31 December 2012, the Group had opened 300 (31 December 2011: 95) wooden door stores. On the front of wardrobes operation, the Group has established wholly owned subsidiaries in Nanhai district of Foshan city in Guangdong Province to manufacture wardrobe products in leased plant during the period, and the plant has come on stream in July 2012. As of 31 December 2012, the Group had opened 124 (31 December 2011: 45) wardrobe stores. Since the business of wooden doors and wardrobes are still at the initial stage, average fixed costs of its production are higher than flooring businesses, which led to a slight decrease in the overall gross profit margin of the Group when compared with last year. We expect that upon the completion of the construction of the Group's plant in Taizhou City of Jiangsu Province, PRC, the relevant business will improve. In addition, we also plan to expand our authorized manufacturing mode from flooring products to business of wooden doors and wardrobes and attract new authorized manufacturers, with an aim to reducing costs and improving profitability.

3. Forest resources business

As of 31 December 2012, the Group owned the land use rights and forestry concessions of 8,163 hectares of forest assets in Yunnan Province in China and of 137,087 hectares of forest assets in Peru. These forest assets contain several species of trees which are used in premium solid wood flooring products.

Moreover, the Company and International Finance Corporation (¡¥¡¥IFC''), a member of the World Bank group and a shareholder of the Company holding approximately 7.22% of the issued share capital of the Company as at the date of this announcement, entered into a loan agreement on 15 January 2013, whereby IFC agrees to lend and the Company agrees to borrow including but not limited to fixed term loans of up to US$ 30,000,000 and convertible loans of up to US$10,000,000. Assuming that all loans are drawn, the net proceeds of the loans (net of fees and expenses to secure the loan) are estimated to be approximately US$39,250,000 (equivalent to approximately HK$305,365,000), which are intended to be used to fund the acquisition of plantations in China for wood supply of the Group in the country and satisfy the need of related working capital. For details please refer to the announcement of the Company dated 15 January 2013.

Business Outlook - For the year ended December 31, 2012

Looking forward, we expect that the demand of household products will be further driven by the increasing purchasing power of consumers in the PRC and development of urbanization in the nation. In terms of downstream business, we will leverage our advantages in the core flooring businesses and brands as well as the widely-spread sales network of the Group to continuously tap the market of diversified household products and establish our brand in the area. Besides, since the sales of the Group will sustainedly propel the demand of wood from upstream, we will also enhance our control on wood resources in the future to ensure that the Group and its authorized manufacturers can enjoy steady supply of high quality wood. The Group will constantly adjust and integrate its business in line with the economic development of the market to create even greater value for our shareholders.

Source: Nature Flooring (02083) Annual Results Announcement
Chairman Se Hok Pan Issued Capital (shares) 1,482M
Par Value USD 0.001 Market Capitalisation (HKD) 2,045M
 
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