Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
CHINA TING
HKEx Stock Code : 03398 
 
Corporate Profile
Engaged in the manufacturing and sale of garments.

Business Review - For the year ended December 31, 2012

The fashion and textile industry experienced a challenging time in the second half of 2012. The Gorup's major market, the United States, which accounted for 63.1% of the turnover, was recovering but at a pace slower than expected.

Europe also continued to struggle with its unabated debts which have dampened consumers' confidence.

Meanwhile, China's economy is losing its strong growth, partly due to the sluggish global economy and continuing uncertainty in the Eurozone economy. The slow growing in the PRC economy is also attributable to its own inflation.

Its strong currency, and elevated costs of labour and raw materials are factors adversely affect the Group's competitiveness in the export business, especially when compared against countries, such as India and Vietnam, and other emerging economies. Consumers' power, today, has weakened and demand veers towards a focus on price and basics.

OEM/ODM business

The Group's OEM/ODM business, which is the major source of income of the Group, increased slightly in 2012, generating a total of HK$2,109.8 million, representing 81.7% of the Group's total revenue in 2012. The segment profit before income tax from the Group's OEM/ODM business was HK$202.4 million.

Faced with keen competition from other Asian countries in a very difficult market environment, the Group continues to focus on better quality, speed to market and improving productivity, targeting new customers especially in Europe and Asia.

Fashion Retail Business

The revenue generated from the fashion retail business in 2012 was HK$472.2 million and the segment profit before income tax was HK$28.5 million.

Due to generally unstable economic conditions, the pace of China's economic growth has slackened with a decline in consumer spending power.

Management, however, still views an important potential in its long-term retail business which has been undergoing restructuring in the past year. New strategies implemented target an upgrade of brand image to support aggressive retail network expansion.

2012 has seen a new partnership between the Group and G-III Apparel Group Ltd of the USA, for an exclusive distribution of Calvin Klein's new line ¡X ¡§Calvin Klein ¡X Performance¡¨ ¡X in China and Hong Kong. This collection of trendy active-wear designed in the USA is expected to be very popular and merchandisable across a wide range of female consumers nationwide.

Business Outlook - For the year ended December 31, 2012

Further economic recovery in the United States is expected in 2013 though the pace is unpredictable. This, however, does not help boost consumers' confidence in the weakened international markets where promised improvement has yet to happen.

To face the coming challenges, the Group will continue to improve its efficiency and profitability in the OEM/ODM business, with design innovation, impeccable quality and speed-to-market delivery. Emphasis will be on controlling operating expenditures, improving our services to customers and making aggressive inroads in market development.

The focus of the Group continues to be on fashion retailing despite increasing competition and a market that is expected to be without much growth in 2013. The new austerity measures currently being implemented by the new Chinese government are hitting luxury brands, notably in the watch, wine and accessory fields but also top pret-a-porter brands which are all seeing a strong drop in business.

Our brands, which do not fall into these categories, continue to expand at a relatively healthy pace although management expects to see a possible drop in profit margins because of the evident overall slowdown in consumer spending power.

Active restructuring was initiated in 2012 with the relocation of the Group's retail headquarters to Hangzhou's new Central Business District (CBD). A streamlined but more efficient team of professionals now oversee the development of each brand, most notably ¡§Finity¡¨ for ladies and ¡§Riverstone¡¨ for men.

Our ¡§Calvin Klein ¡X Performance¡¨ partnership with GIII Apparel Group Ltd of the USA is progressing well and has seen its first store opened in the fall of 2012 performing well. The brand is set to continue its aggressive growth in China's market where trendy active wear is becoming very popular and in great demand. The focal point of our attention will be to obtain the best locations for the expansion of the brand in different tiered cities.

Overall, the forecast for the year to come is conservatively optimistic although the pace will be set by the return to health of the international markets in general.

Source: China Ting Group (03398) Annual Results Announcement
Chairman TING Man Yi Issued Capital (shares) 2,100M
Par Value HKD 0.1 Market Capitalisation (HKD) 1,134M
 
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