Man Wah warns interim profit to slump up to 90 per cent
Man Wah Holdings warns interim net profit for the six months to end-September will plunge 70 to 90 per cent from about HK$1.146 billion a year earlier, citing surging chemical raw-material costs from Middle East conflicts and industry price competition. The group also booked impairment on its US acq
Man Wah Holdings has issued a profit warning, saying it expects net profit for the six months to the end of September to fall by 70 to 90 per cent from about HK$1.146 billion in the same period last year.
The sofa maker attributed the decline mainly to a sustained sharp rise in the prices of core chemical raw materials driven by the Middle East conflict, which pushed up production costs. It said intensifying competition in the industry had caused a lag in product price adjustments, which failed to fully cover the increase in raw-material costs, dragging down overall gross margins.
The group said its main operating revenue had remained broadly stable, with the profit fall primarily stemming from cost-side pressures.
In addition, the US business acquired in December last year incurred operating losses because of higher raw-material costs and weak market demand. Man Wah said Southern Motion, Inc. had filed for Chapter 11 bankruptcy proceedings in the United States, and the group recognised an impairment loss on the goodwill and other intangible assets related to the acquisition during the period.
The company said it would continue to take various measures to hedge against raw-material price fluctuations, optimise its global production layout, push forward the restructuring of the acquired US business, strictly control operating costs and improve operational efficiency. It stressed that management remained confident in the group's medium- and long-term overall development.