Hong Kong – Hong Kong – Flexible foamer and bedding producer FoaMasters International Ltd has become the first Chinese foam-making company to list on the UK’s AIM (alternative investment market).
However, the recent softness in the stock market has led to the firm downgrading its original investment plans by $ 23.5 million to $ 11.5 million, because it has gathered only around half of the $ 5 million that it hoped to raise.
The company, which is valued at around $ 68 million, planned to construct factories in China and India in 2010, but has postponed these plans in order to reduce the group’s cash requirements by $ 6.6 million, said a 5 Dec statement by FoaMasters’ broker, Hanson-Westhouse.
Reining in investment
FoaMasters has also reduced its spending on the two Chinese plants by $ 9 million, by planning to lease the plants instead of purchasing them, the group said.
As a result of these changes, the Chinese foam group has also reduced its revenue predictions. FoaMasters forecast for sales in 2008 has dropped 11 percent to $ 135.5 million and for 2009 by 18 percent to $ 168.8 million. Its estimated profit for 2008 has dropped 29 percent to $ 13.4 million.
In 2006, turnover was around $ 72.2 million, with $ 6.7 million profit. FoaMasters predicts that 2007 turnover will rise to $ 103.2 million with profits of $ 8.8 million.
FoaMasters has still managed to raise $ 2.7 million, which it will spend on expanding its business, said Jack Cheong, ceo of the Hong Kong- headquarted company.
Cheong said in a 5 Dec presentation that the admission to AIM will provide the company with “a firm and a stable corporate structure and a platform for growth.”
Founded in Macau in 1964 by the Cheong family, FoaMasters has eight factories – six in China and two in Vietnam — and will open a further two facilities in Jiashan and Heshan, China by the end of 2007.
The company, which has 1900 employees, originally planned to open a new foam plant every year over the next three years.
Five of the factories in China produce foam and each have 6000-9000 tonnes/year capacity, while the company uses the sixth facility in Shenzhen to make its own PU machinery, saving time and money, said Kim Seng Teh, chairman of FoaMasters.
Back to latex in China
Teh said in a 29 Nov email to Urethanes Technology International that the plant in Heshan will produce “environmentally friendly products, natural rubber latex foam and carpet underlay.” The facility Jiashan will make PU foam and cater to the home furniture industry in the Zhejiang region said The.
FoaMasters makes flexible slabstock foam used in furniture, footwear and bedding, as well as its own brand of bedding products, S’fonia, which was created in 2006.
S’fonia products, which made up 15 percent of FoaMasters’ overall sales in 2006, are exported to Littlewoods and Wal-Mart.
The remaining 85 percent of FoaMasters’ sales come from slabstock foam ( 75 percent) and chemical trading (10 percent).
About 60 percent of the company’s foam is exported to the US, Canada and Eupore, for use by furniture and footwear retailers such as LA-Z-BOY, Nike, Adidas, Land of Leather, IKEA, Wal-Mart, Littlewood and Toys R US, in their products. The rest is sold to local converters.
According to Teh, FoaMasters aims to raise the proportion of sales from finished goods by as much as 10 percent over the next three years, “as we focus more on our own branding of S’Fonia bedding products.”
The South East Asia Holding Group, recently received accreditation from the Satra Technology Centre in UK for its foam-testing laboratories and ISO 9001 and ISO 14001 certifications from the International Standards Organisation. In addition, the group’s products have been accredited to Fire Retardant Standard BS5852 and CAL TB 117, giving it a marketing advantage in Europe and the US, where fire requirement are more stringent.
After the launch, FoaMasters’ share price rose from $ 0.375 to $ 0.425.
(Source: Urethane Technology International Vol 24, No. 6 – December 2007/January 2008)