Xingquan to invest in new knitting machines

KUALA LUMPUR: China-based shoemaker Xingquan International Sports Holdings Ltd is planning to spend 150 million yuan (RM99.3 million) by the first half of this year to buy new knitting machines, as part of its plan to venture into the production of knit fabric.
“By manufacturing a major portion of our shoe materials like shoe soles and knit fabric, we will be able to further lower our production costs through our integrated business model while ensuring the quality of our products are maintained,” its chairman and CEO Datuk Wu Qing Quan (pix) told reporters after its AGM yesterday.
“This would also enable us to improve our existing products and expand our product range,” he added, saying that currently the company purchases knit fabric for its shoes and apparel production from external suppliers.
The company, which proposed to undertake a rights issue exercise in September 2015 to raise up to 83 million yuan to buy knitting equipment, is yet to hold an EGM to gain shareholders approval.
Wu said the remaining 67 million yuan will be internally funded.
“For phase one, we plan to acquire about 80 to 100 units. After we’ve completed the first phase, then we will decide to proceed with the next phase,” he said.
Commenting on the outlook for the company, Wu said he expects this year to be challenging, as economic uncertainties in China may impact the spending pattern of Chinese consumers.
China’s GDP (gross domestic product) has slowed from 7.3% in 2014 to 6.9% in 2015.
Wu said that the stock market crash in China last year and the aggressive expansion of online e-commerce platforms there will also have a negative impact on retail spending.
In a bid to counter all this, he said, the company is planning to increase its sales by opening new profitable points of sales (POS) and growing its online e-commerce business.
“We started the e-commerce platform two years ago but now we plan to be more aggressive in this platform because this (online shopping) trend is developing fast in China,” Wu said. The online business currently contributes less than 10% of the company’s revenue.
For the first quarter ended Sept 30, 2015, the company’s net profit declined 82% to RM7.13 million, from RM39.4 million in the previous year’s corresponding quarter, mainly due to the decrease in overall revenue and increase in selling and distribution expenses.
Revenue was down 33.3% to RM134.77 million, from RM202.05 million previously, primarily due to the decrease in sales volume of shoes and apparel.
The group’s own brand, known as Gertop, which includes a range of shoes, apparel and accessories, are sold at 111 self-operated POS owned by the group and more than 1,000 POS via 25 distributors in 26 provinces in China.
Its shoe soles are also sold to other China-based manufacturers, such as Xtep, Peak and Qiaodan.