Steel materials supplier sees profit rise 156pc
Van Shung Chong Holdings' interim net profit jumped 156 per cent year on year on the back of increased sales and an improved profit margin.
The steel materials supplier's net profit in the six months to September 30 rose to HK$37.24 million from HK$14.52 million in the same period last year.
The growth of net earnings was higher than that of the turnover, which increased 25 per cent to HK$1.27 billion, reflecting an improved profit margin.
Chairman Andrew Yao Cho-fai said that thanks to better control over inventories and supplies, the company's overall gross margin increased by 6 per cent over the period.
The profit improvement was also due to the absence of a discontinued processing operation which made an operating loss of HK$2.02 million a year ago.
In spite of the profit growth, the company did not declare an interim dividend.
Mr Yao said the company would instead use its cash to finance a proposed share buy-back offer, which he said could benefit shareholders more than a dividend.
The company is offering to repurchase shares at a price of 98 HK cents each, a 8.79 per cent premium to yesterday's close of 91 cents.
Controlling shareholder Huge Top, which holds 56 per cent of Van Shung Chong, has said it will not accept the offer.
Meanwhile, the interim result showed sales growth in the company's China operations.
Mainland sales jumped to almost 50 per cent of total turnover, compared with 46 per cent previously.
The company's Hong Kong building products business, however, continued to make a loss in the six months. Despite a five-fold increase in sales to HK$86 million, the division recorded an operating loss of HK$700,000.
To better capture the growth potential of the China market, Mr Yao said the company last week lined up iron and steel giant Shougang Group to set up a joint venture for a new steel product plant in Beijing.
