Man Wah sales soar 29.9% in fiscal year

Chinese exporter improvements help mitigate rising production costs

Jay McIntosh -- Furniture Today, June 15, 2011

HONG KONG — Man Wah Holdings, producers of the Cheers motion sofa line, reported a 29.9% surge in sales in the fiscal year ended March 31 and maintained its profit in the face of rising costs.

Worldwide revenue for the year was 3.8 billion Hong Kong dollars, the equivalent of US$489.3 million at the current exchange rate. The net profit of 621.3 million Hong Kong dollars (US$79.3 million) was up 0.6% from the previous year.

The United States remained the top market for the Chinese manufacturer's goods, with U.S. sales surging 55% to the equivalent of about $266 million for the year.

Man Wah said it kept its gross profit margin stable at 42.5%, reflecting stringent cost controls and sales strategy adjustments, despite increased production costs. The net profit margin, however, declined to 16.3% from 21.1% the previous year, partly because of soaring ocean freight costs.

"The problem of sharply increased raw material prices and labor costs, as well as RMB (China currency) appreciation, affected all types of enterprises worldwide," said Wong Man Li, chairman and managing director of Man Wah. "Last year, we experienced the highest increase in raw material prices over the past 20 years.

"Fortunately, the group successfully kept the gross profit margin at a high level through improving economies of scale and working efficiency, and also over 100 new sofa models we launched were supported by our enhanced research and development capability," Wong said.

He added that the company increased the average selling price of its export sofas by 7% and sofas sold in China by 13% during the year.

Man Wah said that according to the latest research report of Euromonitor International, its U.S. market share in motion upholstery has grown to 7.3% from 2.6% in 2008. The company says it is the top reclining sofa manufacturer in China and No. 5 in the U.S. market.

The manufacturer, which raised funds last year by selling about a 25% stake in the company in a public stock offering, said it has a new factory under construction in Wujiang, China, that is expected to open in the second half of 2012. The company also plans another plant in Tianjin to cope with expected increased demand over the next five to eight years, and to take advantage of lower logistics costs and shorter delivery time to northern China.

"We are optimistic about the potential of both the international and domestic recliner sofa markets, providing wide development potential for Man Wah," Wong said.

Based on the latest fiscal year sales, Man Wah ranked No. 10 on Furniture/Today's ranking of the Top 25 furniture sources for the U.S. market, up from No. 23 the previous year.