Pacific Textiles performs satisfactorily against challenging environment

Mr Wan Wai Loi, Chairman of Pacific Textiles Holdings presents consolidated financial results for the 2011 financial year and to give an overview of the Group’s strategy and business outlook.

The 2011 Financial Year was a very challenging year for the industry. Although the world economy recovered with a reasonable upswing in the first half of 2010, the momentum subdued with a rise in unemployment in most industrial economies in the latter half of the year. Inflationary pressure was mounting, in par ticular, the prices of cotton and cotton yarns reached record high levels. During the year under review, cotton prices went up by more than double, a result of global shortage and poor harvest in Pakistan and China which made the supply concern prominent.

As cotton is the major raw material for producing cotton yarn, the sharp hikes in cotton price had exer ted pressure on our operating cost. Though the cotton price had eased slightly in the last few months, however, with the volatility of cotton prices, the upsurge of labour costs and the appreciation of Renminbi, we faced unprecedented challenges during the year under review. Despite the tough and fragile business climate, the Group spearheaded with its growth and operating strategies: a combination of improved efficient operational capabilities, stringent cost control, financial vigilance, strong commitment to our customers, and investment for the future.

The financial year under review saw the Group continues to stay as one of the strongest players in the highly competitive textile industry. Driven by strengthened marketing activities, we have registered consolidated revenue of HK$7,180.7 million for the 2011 Financial Year, which is a growth of 22.1% over previous year. The Group’s sales volume achieved a growth rate of 6.8% and reached 209.1 million pounds, compared to 195.8 million pounds of the last financial year.

Profit attributable to shareholders amounted to HK$876.4 million, while earnings per share was HK$ 0.61, compared to HK$0.56 in the previous financial year, representing an increase of 8.9%.

The Board has proposed a final dividend of HK19 cents per share. Together with an interim dividend of HK 14 cents per share, the total dividend for the 2011 Financial Year will be HK33 cents per share.

The 2011 Financial Year was a year of consolidating the Group’s core pillars. With a reputable history of ser vice and product reliability, we continued to strengthen our position as one of the leading fabric manufacturers in the industry. The Group persisted to maintain strict monitoring of cost control, optimisation improvements of existing production process and introduction of technological innovations to enhance operational efficiency. The Group also regularly adopted programs to achieve effective inventory management by analysing inventory adjustments.

During the 2011 Financial Year, the Group took the initiative to diversify its production base to Vietnam by establishing a joint venture with Crystal International Limited, GSI Trading Hong Kong Limited and Toray Industries (H.K.) Limited for knitted fabric manufacturing business in Vietnam. This joint venture enjoys access to market in Japan with no tariffs and quotas and the low operating cost in Vietnam offers a cost effective production base for the Group. I am delighted to inform you that the investment licence was approved by the government authorities of Vietnam earlier this year and construction plans for the production facilities would be underway soon.

In November 2010, the Company was awarded China Knitting Industry Technology Award by the 4th Council of the China Knitting Industry Association. The award recognizes the Group’s dedicated effor t in technology innovation in textiles industry. In addition, Mr. Choi Kin Chung, our Emeritus Chairman and non-executive Director, was awarded the China Knitting Industry Lifetime Achievement Award to recognize Mr. Choi’s dedication and contribution to the textiles industry.

As disclosed in the various announcements made by the Company in the past few months, the Group had disposed par t of its shareholding interest in PT Sri Lanka under the Pre-IPO Private Placement to certain institutional and non-institutional investors in May this year. The Pre-IPO Private Placement was very successful. The spin-off of PT Sri Lanka for separate listing on the Main Board of the Colombo Stock Exchange is progressing well.

This move will undoubtedly enhance the profile of PT Sri Lanka and provide the operation a funding platform for future business development. After the PT Sri Lanka IPO, we will still be the largest shareholder of PT Sri Lanka and will continue to enjoy the benefits from the growth and development of the business through our shareholding interest.

We look forward to the next year with confidence. We will continue to build on the achievements made this year. We will implement further measures to improve our production yield and quality assurance, enlarge product mix and technical capabilities to capture the increasing demand of fabrics from different markets underpinned by the rebound in the global economy.

However, recent events in the Middle East, North Africa and Japan, coupled with less than satisfactory economic data from developed economies are yet another reminders of the ongoing uncertainties in the global economy. Other factors that call for caution include fluctuating commodity prices, appreciation of the Renminbi and increasing operating costs. We will ensure that the Group will remain focused on sustainable growth and progressively strengthen our base in terms of products, technologies, production capacities and organisational efficiency.

With our strong business strategy and competent execution, we believe that we have the unique capabilities to forge ahead.