Interview with CG Tech CEO
Q: Let’s start with some background information about the group?
The Group manufactures and distributes PET chips and yarn products for the textile industry in China.
The Group reported a 57.9% increase in earnings to RMB61.7mil for the half year ended 30 June 2006. What were the factors that contributed to the strong growth at half-time?
The Strong growth was a result of 38.2% increase in turnover due to the upgrading of existing bright & semi-dull PET chips and yarn production facilities, the start of new production facilities for alkali-souble PET chips and the launch of a new product, combed yarn.
Q: What are the earnings prospects like for the next 12 – 18 months?
Give our sterling performance in the first half, and with various production expansions coming onstream, we expect FY2006 net profit to increase by 50% over FY2005. We have begun the construction of a new plant for the production of polyster short fibre in July 2006. We expect the construction to be completed in the first quarter of 2007 and plan to commence production in the second quarter of 2007.
Q: What’s your strategy for growth in the next 2-3 years? What are the key challenges you envisage?
We have a two-pronged strategy for the next two years. Firstly we want to strength our unique positioning through our R&D capability, vertically integrated PET chips and Polyester Short Fibre and Yarn supply chain. While we are sustaining the margin for our existing PET chips, we will develop more new differentiated functional PSF and yarn products that are in high demand.
Secondly, to service the direct market demand, we will establish an interactive sales network, provide market support for new products and create awareness for our “CG” brand.
As the scale of our operations gets enlarged, our manpower expands and the complexity of management icreases by the day, the key challenges ahead for us will be how to maintain the Group’s high level of unity and effectiveness in execution.
Q: Tell us about the Group’s financial position at the end of June 2006 versus one year ago.
Thanks to our strong earnings growth, our earning cashflow rose 48.4% to RMB60.1 million as at 30 June 2006 from a year ago.
As for our return-on-equity, it improves to 37% in 1H06, up from 27% in 1H05.
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