KUALA LUMPUR: China-based sports shoemaker Xidelang Holdings Ltd said the recent yuan devaluation has a minimal impact on its revenue as it buys its raw materials in US dollars.

Xidelang managing director and chief executive officer Ding Peng Peng said while falling oil prices bode well for the group as it enjoys lower raw material costs, from a macro perspective, the low oil price points to weakness in the global economy which in turn affects consumer sentiment and spending. “But it would be good for foreign purchasers, as the devaluation of yuan will make their purchase cheaper. For instance, they may spend 10 yuan (RM6.70) for a pair of shoes before, but they now spend 9.8 yuan,” he told reporters after the group’s extraordinary general meeting (EGM) here yesterday. 

Ding said Xidelang had seen an increase in orders due to the weaker yuan, but did not elaborate.

The group posted a lower net profit of RM491,000 for the second quarter ended June 30, 2015, compared with RM14.98 million a year ago, due to higher expenditure in promotion and advertisement.

Ding said, however, the group’s performance should not merely be measured by its profit, but also whether it has a good structure and expansion plan. “We will continue to look for merger-and-acquisition opportunities, with a focus on trading companies or those with similar businesses, to ensure that the group continues to grow,” he said.

Meanwhile, Xidelang will be adding two more production lines to its plant by the end of the year, giving the group another 1.5 million pairs of shoes of capacity. Ding said the group had recently added two production lines in the first half of 2015 (1H15). He said currently, the group operates six production lines including the two new lines added in 1H15, bringing its total capacity to six million pairs of shoes.

Ding in July this year announced that the group was expanding its capacity to intensify its original design manufacturer (ODM) business and solidify its presence in the premium market in Europe and the United States.

On Xidelang’s proposed acquisition of Jinjiang Yangsen Garments Co Ltd, which was announced on July 29, Ding said it was progressing smoothly. “The proposed acquisition is in progress. We have appointed the relevant entity and team to carry out a study on this. I will not say that after two months we will have successfully acquired the company as it is not definite yet, I can only say that it is progressing smoothly,” he said.

Jinjiang Yangsen is principally engaged in the design, manufacturing, distribution and marketing of apparels on an ODM basis for international brands such as Primark, Mizuno, Joma, New Yorker and Admiral.

Ding said the proposed acquisition will allow Xidelang to diversify into the garment business, which will synergise with its sports shoe business. 

Both parties have three months to fulfil the due diligence before entering into a definitive agreement. Earlier at the EGM, Xidelang’s (fundamental: 1.75; valuation: 1.5) shareholders approved the proposed bonus issue of up to 1.97 billion new shares of three US cents (13 sen) each in Xidelang on the basis of one bonus share for every one existing share held.

This article first appeared in The Edge Financial Daily, on September 22, 2015.