Hong Kong — Sinomax, a flexible foam to sleep products company, generated sales of HK $2.997bn ($386m) in 2019 down 29.7% on the previous financial year.
This translated into a post-tax loss of HK $147.6m in 2019. This compares with a profit of HK $27.5m in 2018.
The numbers come from the company's unaudited financial results. Normally, the numbers would have been audited before release to the Hong Kong Stock Exchange, but the audit process has been halted by the impact of Coronavirus in the region. The company's audit committee has checked the numbers.
Sinomax said that it may have been hit twice by US trade sanctions on Chinese products in 2019. Its direct sales to the US were definintely hit, said the company. It added: 'Some of our PRC customers who were buying our foam to produce products for their customers in the US, might also have been affected by the US-China trade war. Accordingly, our sales in the China market decreased as well.'
The company's gross profit margin did grow in 2019. This is because it managed to benefit from the lower cost of TDI, but this was offset by the cost of a trial run at a new factory in Vietnam.
The post-tax losses came from the fall in value of the intangible assets and goodwill related to Sinomax's acquisition of Dormeo North America in 2016.
Sinomax said: 'Sales of Dormeo was highly concentrated with several key customers to whom the sales in 2019 dropped significantly.'
'Having considered that the financial performance of Dormeo would not turn around in the coming few years, we made impairment provision of goodwill, brand name and customer relationship directly related to Domeo. This all added up to about HK$137m and it was included in profit and loss account.
The company said it had generated significantly more cash in 2019 than it did in 2018.
Looking ahead the company said the global effects of Coronavirus and the China-US trade war was making the future uncertain. Is said that during 2019, its plant in Vietnam had started making foam for customers in South East Asia. This, its plants in china and the US plant in Tennessee should give it additional logistical flexibility and the ability to manage production and costs. It plans to sell more directly and rely on smaller customers.
Currency conversion: XE.com
