Fountain Set declares unaudited consolidated 2007 interim results

21 May '07

3 min read

In order to counter the effect of appreciation of the Renminbi, increase in minimum wage and the reductions in VAT refund rate in the PRC, the Group was able to increase the average selling price of products during the period under review. As a result, increase in production costs was largely compensated by the rise in selling price.

At the same time, the drop of production volume during the period under review reduced the consumption of certain variable costs such as raw materials, energy and fuel as well as water.

However, due to the temporary nature of volume reduction, the Group was not able to reduce fixed costs significantly, thus resulted in lower profit margin of 2.02% compared with 2.34% (excluding the net gain on disposal of property interests) of the same period last year.

For the period under review, turnover from the production and sales of dyed fabrics, sewing threads and yarns was approximately HK$2,658,896,000, a decrease of 12.40% as compared with the same period last year, and accounted for 89.33% of the Group's total turnover. This decrease was a result of the temporary reduction of the production capacity of Fuan.

For the first half of financial year 2007, turnover from the production and sales of garments reached approximately HK$317,521,000, a sharp increase of 56.56% as compared with the same period last year, and accounted for 10.67% of the Group's total turnover.

The Group entered into a joint venture arrangement in garment business in December 2005. Since then, this joint venture established a factory in Dongguan and acquired another factory in Ningbo and the production capacity increased by over 50% compared to the first half of financial year 2006.

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