Mainland Headwear is warning investors that it is expected to record a “significant decline in performance in the first half period ended June 30,” which is primarily attributable to the increasing production cost of manufacturing businesses in the People's Republic of China. The decline is related to the rapid rise in labor cost and appreciation of renminbi yuan in the first half of 2013.
The Group has completed the acquisition of production facilities in Bangladesh in March 2013 and taken measures to increase the production efficiency of its production plants in the PRC to combat the soaring production cost.
In order to combat the soaring production cost, the board of directors of Mainland Headwear has recently decided to scale down the operation of the factory in Panyu, Guangdong Province, PRC so as to cut down production cost. The orders that will be affected due to this decision will be shifted to the factory in Bangladesh.
A write-down on the plant and equipment and inventories of about HK$16 million will be recorded in the interim results of the Group for the six months ended 30 June 2013. The figure is an estimated amount based on judgment of Mainland Headwear’s management and has not been confirmed or audited by the company’s auditors.
The Board told shareholders and potential investors that the Group may record a loss in the Interim Results, primarily due to the increase in production cost and the write-down in the plant and equipment and inventories of the factory in Panyu.
