Monday, November 30, 2020
 
Columnist
Martin Hennecke
 
HUAZHONG HLDG
HKEx Stock Code : 06830 
 
Corporate Profile
The Group is one of the principal suppliers of automobile body parts in China equipped with strong ability in production, product design and development.

Business Review - For the year ended December 31, 2012

2012 was an extremely challenging year for the Group, as production costs, including the costs of raw materials and employee salary, continued to increase. In addition, China's economic slowdown along with traffic congestion relief and vehicle purchase quota in mega-size metropolitans weakened the market demand, thus intensifying the competition amongst the auto part manufacturers in China. Despite many obstacles troubling the market and the business environment, the Group together with its entire employees vigorously strove hard to implement stringent cost control and cement the long-term cooperation with our clients. In addition to these measures, work in other areas also yielded significant results. The Group not merely maintained the competitive advantages of its business, but also laid solid foundation for the continuance of its rapid development in future.

For the Year, the Group's revenue was approximately RMB1.156 billion, representing a slight decrease of approximately 1.1% as compared to approximately RMB1.169 billion in 2011. Profit attributable to the owners of the parent for the Year was approximately RMB2.0 million, representing a decrease of approximately 98.2% as compared to approximately RMB110.2 million in 2011.

During the Year, the Group acquired the assets and business of a bankrupt company in Germany which engaged in manufacturing and sales of moulding and tools at a consideration of approximately RMB31.9 million (equivalent to approximately Euro 3.8 million). The acquisition is to strengthen and enhance the Group's moulding manufacturing technology, production equipment and development of overseas market. The acquisition was completed in April 2012.

The expansion and upgrade of the existing manufacturing facilities in Ningbo and the new manufacturing facilities in Wuhu and Yantai were completed during the Year. The new manufacturing facilities in Foshan were under construction during the Year and were expected to be completed in 2013.

During the Year, the Group also made partial payments for acquiring the land use right of some pieces of land in Chongqing and Hangzhou Bay for further development of the Group.

Other than the aforementioned, there was no material acquisition/disposal and investments during the Year.

Business Outlook - For the year ended December 31, 2012

We believe, according to the forecasts delivered by various reports prepared by many research institutions over China automobile industry in 2013, that the domestic automobile industry, following the rebounding national economy, is expected to be better than the two previous years, with the stable increase of automobile sales volume in 2013. It is expected that more than 20 million cars will be sold. In terms of exports, China exported more than 1 million cars in 2012 for the first time. As the sale of domestic automobile remains high and continues to grow at a stable pace, the export of automobiles in 2013 will become the market highlight.

Transformation remains to be the main rhythm of the macro-economy in 2013. We expect that the Chinese government will continue to stabilize the GDP growth rate. Hence, it creates more favourable conditions for the steady growth of 2013 automobile market. On the other hand, the bottleneck restriction imposed on the automobile market will be more stringent. In 2013, the macro-economy will continue to develop steadily while the market structure will be adjusted gradually. The automobile product diversification, miniaturization and energy-saving will provide consumers with more choices. The national incentive policy for increasing domestic demand, the rigid demand for automobiles in China and so on will provide good environment and conditions for the development of the automobile industry. However, various adverse factors, including the slowing global economic growth, the increase in the cost of automobile consumption, the pressures on Renminbi appreciation and the impact of increasing trade frictions on exports, will also bring challenges to the future development of the Group.

Nonetheless, according to the forecast on the growth momentum of China's automobile market previously delivered by China Automotive Technology & Research Center, the growth in automobile sales will shift from the first-tier cities to the second-and third-tier cities and, along with the constant improvements in the living standard in the rural areas, the rural automobile market will experience a rapid growth. In addition, it is expected that, in 2013, automobile production and sale will undergo structural differentiations.

In light of the above, the Group will continue to implement its development strategy of ¡§expanding existing production facilities and capacity, committing to product research and development and engineering and implementing strategic investments¡¨, and become a leading automobile body parts manufacturer in China in terms of reputation and market share.

We believe that, along with the continuous rapid development of the national economy and the improvement in the living standards and life quality of people in both urban and rural areas in China, there are immense growth potentials for the automobile market in China, which will inevitably drive the growth of the automobile body parts market and the demand for mid- and high-end automobile body parts by automobile manufacturers.

Source: Huazhong Holdings (06830) Annual Results Announcement
Chairman Zhou Minfeng Issued Capital (shares) 800M
Par Value HKD 0.1 Market Capitalisation (HKD) 960M
 
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