Dr. Gordon YEN
Executive Director Fountain Set (Holdings) Limited
Brand customers tend to have a normalised buying pattern, when the raw material price is stable, thus helping factories to plan well on the production schedule.
With Fibre2Fashion Correspondent Cindrella Thawani, in the Face2Face interview, Dr. YEN talks about the declined market price of knitted fabric and increasing cost of labour by Chinese government.
Fountain Set (Holdings) Limited, with its headquarters located in Hong Kong, is striving forward globally through its vertically integrated operations in spinning, knitting, dyeing, printing and finishing.
Its product range includes dyed yarns, sewing threads and garments.
Dr. Gordon YEN caters as the Executive Director of Fountain Set (Holdings) Limited. He joined the Group in year 1999. Moreover, he is the Vice Director General of China Knitting Industry Association; Vice Chairman of Textile Council of Hong Kong; Chairman of The Hong Kong Association of Textile Bleachers, Dyers, Printers and Finishers;
Besides, he is the son-in-law of Mr. HA Chung Fong, Founder of this Group.
Can you share with us the recent change in shareholding structure of Fountain Set?
On May 10 2012, Fountain Set’s Extraordinary General Meeting (EGM) has passed the resolutions proposed in the circular dated April 24 2012, allowing the group to implement the transaction completed under a subscription agreement with Chinatex Corporation dated April 3rd 2012 and the related whitewash waiver.
Under the subscription agreement, Chinatex and Fountain Set have conditionally agreed to subscribe for and allot and issue a total of 4,09,036,000 new shares at a price of HK$1.25 per share, equivalent to approximately 34 percent of the issued share capital of Fountain Set as enlarged by the issue of such new shares.
Upon the completion of this transaction, Fountain Set’s current Chairman Mr. HA Chung Fong, his family trust and his associates will hold approximately 28.56 percent shares of the group. To this extent, Chinatex shall become the largest shareholder of Fountain Set.
The market price of the knitted fabric has declined sharply, owing to the declined prices of cotton and yarn. How do you see the upcoming market ahead? What will be its consequence on the companies?
The market should see stable with relatively low cotton and yarn price until around August this year.
When the data about the upcoming cotton harvest season is ready, the crop which to be harvested in September / October will be used for the next year round, thus by then, it will give us a more clear picture on the balance of supply and demand.
On the other hand, brand customers tend to have a normalised buying pattern when the raw material price is stable, thus helping factories to plan well on the production schedule.
For the impact of volatile cotton price on Fountain Set, the decline in the costs of cotton and cotton yarn during the last three quarters of calendar year 2011 contributed to downward pressure on market prices of knitted fabrics.
However, the prices have stabilised since the end of 2011 and the cotton yarn inventories that Fountain Set previously purchased at relatively higher prices have been mostly depleted in the first half of financial year 2012.
As a result, barring other unforeseen circumstances that could adversely impact the demand and prices for textile products, Fountain Set believes that the business environment of the textile industry could gradually improve within the next six to twelve months.
With the anticipation of further consolidation of fabric supply chain by many brands and retailers, Fountain Set is implementing more aggressive sales strategies and cost control measures to enhance its competitiveness.
What kind of imminent challenges you envisage that could confront in the textile industry?
a) Concerns over European sovereign debt:
The continuing concerns over European sovereign debt are likely to maintain pressure on liquidity in the global banking system thus increasing market cost of borrowing.
b) Increased cost of labour in China:
The minimum wages are likely to continue to increase by the Chinese government resulted in continuous pressure on the cost of labour and other labour intensive services.
c) Adjustment in fabric price due to volatility in cotton price and possible surge on fuel prices:
In addition, potential risks for the industry will stem from the continuous volatility in cotton price as well as possible surge on fuel prices, all of which are universal to Fountain Set and the major competitors and would therefore contribute towards stronger momentum for adjustment in average selling price of fabrics.
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