[For Immediate Release]
(Hong Kong, 12 December 2001) - Leading audio-visual ODM and OEM manufacturer Tonic Industries Holdings Limited ("Tonic") (Stock Code: 978) today announced its interim results for the six months ended 30 September 2001.
It recorded a turnover of HK$1,253 million when compared to last year's figure of HK$1,390 million. Profit attributable to shareholders was HK$18.7 million. Basic earnings per share were HK 2.9 cents.
The Board of Directors recommended an interim dividend of HK 0.5 cent per share for the six months ended 30 September 2001.
Mr. Simon Ling, Chairman of Tonic said, "During the last two years, the Group has seen a consolidation period, taking the opportunity to expand production capacities, improve production capabilities to cope with the needs of the future, carry out a thorough review of production efficiencies and enhance product research and development. Most of the budgeted capital expenditure has been paid for and we do not expect any significant capital expenditure next year. Profits are therefore expected to improve in 2002."
During the period, the market remained competitive and the world economy sluggish. Decreases in worldwide demand depressed product selling prices. The Group's profit margin was affected by its expansion of production capacities during this consolidation period. However, riding on the Group's broad customer base and the drop in raw material costs which compensated for the decrease in sale prices, the Group was able to maintain its turnover despite the unfavorable economic environment.
Evaluating turnover by geographical areas, sales to the United States increased from 34% last year to approximately 43% while sales to Europe and Asia accounted for 31% and 26% respectively of the total Group's sales.
The Group's Home Appliance Division enjoyed continuous growth with products being well accepted by European customers. Turnover for the division increased to HK$40 million during the period and is expected to further increase in the years ahead. Products have been diversified to include air purifiers, steam stations, electric ovens as well as various new coffee making machine models.
Mr Ling commenting on the performance of the Home Appliance Division and said, "The achievement has demonstrated that we are on the right track with the diversification of our product mix and investment in R&D. To sustain our leading position in the electronics industry, we are continuing to invest in the R&D of new and constantly improving products."
Committed to R&D, Tonic opened two new R&D centers in Japan and Shenzhen during the period to support and complement existing R&D departments in Hong Kong and the Dongguan factory complex. The Japanese office mainly deals with new product development while the Shenzhen office mainly provides software support solutions. Numerous new products are in the pipeline and are expected to further enrich the Group's product range in the near future.
To capture the increasing demand for digital products, the Group expanded its production abilities by constructing its new factory block 9 and installing advanced machinery. The final stages of construction of factory block 9 were completed during the period. Total production area now exceeds 1,500,000 square feet, an increase of almost 50% as compared to 1999. The number of fully automated production lines has increased from 6 in 1999 to 18. Additional SMT (Surface Mounted Technology) machines, automated insertion machines and 4 heavy oil electric generators have also been installed and are fully operational.
The installation of the heavy oil electric generators is able to reduce the Group's electricity costs by nearly HK$1 million per month. Two remaining units will be installed early next year. This investment is expected to make a return within the next three to four years.
Mr. Ling concluded, "To prepare ahead for the arrival of the digital era, Tonic has enhanced its production efficiency in the last two years. Without the need for further heavy investment, we are confident that Tonic will benefit from the many opportunities to flourish once the recession is over."
About Tonic Industries Holdings Limited
Tonic is principally engaged in the design, manufacture and marketing of a wide range of consumer AV products. These include CD-RW, mini Hi-fi music centres, MD systems, DVD players, CD portables, MP3 products, digital satellite receivers, internet set-top boxes, Dolby Prologic stereo receivers and portable CD/cassette/radio systems, etc. Products are sold on an ODM and/or OEM basis to overseas importers and manufacturers with well-known brandnames such as Alba, Bush, Emerson, GPX, Kenwood, Medion, Pioneer, RCA, Sanyo and Thomson. In 1999, the Group set up 2 divisions - high technology and home appliances, to diversify its business and product mix. The Company was listed on the Hong Kong Stock Exchange in October 1997. Its production facilities are located at Dongguan, the PRC, with a total production area of over 1,500,000 sq.ft.
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