KUALA LUMPUR (Sept 21): Sports shoes maker XiDeLang Holdings Ltd (XDL) will increase another two production lines by the end of the year, which will give the group an additional capacity of 1.5 million pair of shoes.
XDL's managing director and chief executive officer Ding Peng Peng said the group had added two production lines in the first half of 2015 (1H2015), and another two lines would be in place by end of the year.
“The total capacity for the two production lines will be about 1.5 million pair of shoes,” Ding told reporters, after the extraordinary general meeting here today.
He said currently, the group has a total of six production lines, including the two new lines added in the 1H2015 for a total capacity of about 6 million pair of shoes. However, he did not state the capital expenditure for the two new lines.
In July this year, Ding had said the group would expand its capacity to intensify its original design manufacturer (ODM) business to solidify its presence in the premium market in Europe and the United States.
On the group’s acquisition into Jinjang YangSen Garment Co Ltd, which was announced in July 29, Ding said it was progressing smoothly.
“The acquisition was in the progress, we have appointed relevant entity and team to carry out study on this. I would not said after two months we would be successfully acquired the company, as it is not definite yet, I can only said that it is progressing smoothly,” Ding said.
YangSen, a Quanzhou based company, is principally engaged in the design, manufacturing, distribution and marketing of apparels on ODM bass, for international brands such as Primark, Mizuno, Joma, NewYorker and Admiral.
The acquisition will allow XDL to diversify into the garment business, which would synergize with the group’s sports shoe business.
Both parties have three months to fulfil the due diligence, before entering the definitive agreement.
On the impact of the devaluation of the yuan, Ding said the impact was not prominent so far, as the devaluation was in small scale, and the group paid for their raw material in US dollar.
Ding explained that although the lower crude oil price bodes well for the group since the price for the raw material was lower, but on a macro perspective, the lower oil price also points to a lower global economy growth, which in turns affects the spending sentiment of consumer.
“But it would be good for foreign purchaser, as the devaluation of yuan will make their purchase cheaper. For instance, they may spend 10 yuan for a pair of shoes before, now they spend 9.8 yuan, “he added.
When asked whether this situation has brought more orders to the company, Ding said: “Principally, it has.”
However, he did not elaborate further.
Speaking on the group’s lower net profit of RM491,000 for the second quarter ended June 30, as compared to RM14.98 million a year ago, Ding said the lower profit was because of high expenditure in promotion and advertisement.
However, he added that the performance of the group should not merely being measured by profit, but also whether it has a good structure and expansion plan.
“We will continue to look out for merges and acquisitions opportunities, to eye trading companies or other companies with similar business, to ensure the group can continue to grow,” he added.
Also, in 2016, the group will begin its e-commerce in full fledge.
Today, the shareholders of XDL had approved the proposed bonus issue of up to 1.97 billion new ordinary shares of USD0.03 each in XDL, on the basis of one bonus share for every one existing share held by entitled shareholders.
As at 12.30pm, shares in XDL traded unchanged at 13 sen, for a market capitalisation of RM175.2 million.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)