Hong Kong — Polyurethane foam and bedding company Sinomax saw after-tax profits fall by HK$84.2 m ($6.4 m) or 45% to HK$100 m in 2016, the company said in an announcement.
The company issued two profit warnings during 2016 and announced a final dividend to shareholders which was 40% of its’ 2015 value.
The company has however been investing and is setting up a logistics centre of about 180,000 ft² (16,0700m2) in Phoenix, Arizona to serve western North American. It has opened a showroom in New York of about 8700 ft² to demonstrate newly developed products to its customers there.
The company said it has committed to upgrade machinery to improve production efficiency and increase competitiveness, and plans to continue to devote more resources to research and.
And the company is setting up a new foam factory in Shandong to serve customers in that region. This should be operational by the end of 2017, the company said.
It also saw growth in its e-commerce routes to market and saw sales rise from HK$28 m in 2015 to approximately HK$66 m in 2016.
During 2016 revenue increased by HK$630 m or 21.9% to approximately HK$3.5 bn.
Sinomax reported 2016 sales into the local China market were HK$1.9 bn compared to HK$1.7 bn in 2015, an increase of 11%.
Sales in the North American market grew by over one third to HK$1.5 bn in 2016 compared to HK$1.1 bn in 2015.
Sales in Europe more than doubled to HK$109 m compared to HK$54 m in 2015. The company said that consumer demand in the China market was generally weak but it has compensated for this by increasing foam and e-commerce sales.
Sales growth in North America came about as setting up new production facilities enabled cooperation with several new customers. Sales into Europe grew because of the firm's concentration of newly innovated products, it said.
Trial runs of the US subsidiary led to a gross loss of HK$26 m in 2016, the company said. Raw materials costs increased significantly in the fourth quarter of 2016 and hit profits, the firm added.
Looking to 2017, Sinomax said it expects its US factory to be operational in the second quarter of 2017.