EVA Precision Ind Hldgs 0838

[winston]

Not vested.

The Japanese way
Monday, August 11, 2008

Though EVA Precision Industrial Holdings (0838) was established and is based in the mainland, it follows the Japanese style of management, namely the framework of 7S, which refers to strategy, structure, systems, style, staff, super-ordinate goals and skills.

"Japanese customers ask for precise quality of products which can be ready in a short time, said chairman Zhang Hwo Jie.

More than 80 percent of EVA's revenue came from Japanese customers who require high production efficiency, Zhang said.

"For example, our production lead- time for metal stamping moulds and components is 30 to 45 days while [many] other producers average 90 to 120 days."

Established in 1993, EVA opened its first metal stamping mould production plant in Shenzhen and received the first order from a Japanese company, Konica Minolta, a year later.

Konica Minolta is EVA's largest customer and provided 22.2 percent of total revenue as of June 2008.

EVA's Japanese customers also include Canon, Toshiba, Fuji Xerox, Epson, Olympus, Kyocera Mita and Ricoh.

Around 16.4 percent of turnover is derived from customers in Hong Kong, the United States and other countries.

Canon and Fuji Xerox have production plants in Shenzhen, which are located near to Shenzhen (Shiyan) Industrial Park where EVA has three factories.

"China and Hong Kong are their targeted markets and it is easier for them to distribute products to other Asian countries from the mainland," said Zhang.

[winston]

Moulding the future
Mandy Lo
Monday, August 11, 2008

Despite the global financial turmoil and elevated oil prices, EVA Precision Industrial Holdings (0838) expects double-digit growth in turnover this year on its high-end technology mould and component business, said chairman Zhang Hwo Jie.

"The number of orders we have received so far is favorable, so we expect at least double-digit growth in sales," said Zhang.

Net profit of EVA climbed 41.6 percent to HK$153.86 million last year while turnover was up 37.7 percent to HK$952 million.

Core businesses of EVA include design and the manufacture of precision metal, plastic moulds and components for office automation equipment, diagnostic medical equipment and automobile parts.

Since the company was founded in 1993, metal stamping moulds and components have been the largest sales contributors, accounting for 71.9 percent of EVA's revenue last year.

In 2004, the company expanded into plastic moulds and component manufacturing.

"Unlike other competitors in the market, who either specialize in metal moulds or plastic moulds, we manufacture both and provide our customers a vertically integrated one-stop service," said Zhang.

The company's major profit driver would continue to be office automation equipment including moulds and components for photocopiers, printers and multi-functional peripheral items.

"The mould production requires high precision standards to ensure the effective functioning of the final product," said Zhang.

EVA plans to invest about HK$250 million of capital expenditure to further expand its production capacity.

Zhang said a new mould center in Shenzhen has been completed and trial production is in progress.

Production capacity was almost saturated at phase one of the Suzhou plant, and a second phase was under construction and would be completed by March 2009.

"There is still land available on the site for a third phase, in case the capacity is used in years to come," said Zhang.

Upon the full operation of a new production line, the estimated production capacity of metal stamping moulds and components would almost triple, from 7,500 units and 42,900 tonnes to 22,000 units and 112,055 tonnes respectively.

Plastic injection moulds and components are expected to increase from 900 units and 119 million pieces to 3,015 units and 237 million pieces respectively.

"The expanded production capacity will be adequate for the next five years," said Zhang.

EVA has about HK$100 million in cash and has no plans to raise additional funds at the moment, he added.

In spite of the slowdown in the United States and the soaring Chinese currency, Zhang said his company has not been much affected.

"Most of our customers are international brands which distribute goods worldwide, so a weakened economy of one country is not a big deal to our business."

The company's exposure to yuan appreciation was limited as only 6 percent of turnover and 12 percent of purchases were in yuan.

"Most of our sales are denominated in Hong Kong dollars and US dollars," said Zhang.

Small and medium-sized competitors may fail to overcome the challenges of the economic slowdown, he warned.

Gross margins of EVA dropped by 0.2 percent to 31.8 percent last year. Zhang said the increased cost of raw materials has been passed on to customers.

The company was only slightly affected by rising oil prices because of its business nature and geographical location.

"After finishing the manufacturing of moulds and components, our job ends and we transfer the products to the factories of our customers for final assembly. Most of the factories are in Suzhou and Shenzhen, so we save on transportation costs," Zhang explained.