Sun Hing, the Hong-Kong based eyewear company, registered a sharp drop in revenues for its financial year ended on March 31, with overall sales of 912.8 million HK dollars (€102.9m-$117.7m), down by 25.5 percent from HK$ 1,223.9 million a year earlier. Gross profit margin was down by 4.1 percentage points to 17.6 percent and the company posted a pre-tax loss of HK$ 165.7 million (€18.7m-$21.4m) for the period, in contrast with a HK$ 84.7 million pre-tax profit in the previous year.
By segment, sales in the original design manufacturing (ODM) business decreased by 18.8 percent to HK$ 713 million (€80.4m-$92.0m), accounting for about 78 percent of the company’s revenues. The temporary closure of its Chinese factories, the intensification of the U.S.-China trade war and a generally soft European market are mentioned as the main reasons for this drop in its key segment sales. ODM sales went down by 8.1 percent to HK$ 282 million (€31.8m-$36.4m) in the U.S. and by 29.4 percent to HK$ 370 million in Europe (€41.7m-$47.7m). In particular, Sun Hing took a hard hit by Italy with orders down from HK$ 440.6 million (€49.7m-$56.8m) to HK$ 318.9 million (€36.0m-$41.1m).
In terms of product category, the mix remains almost unchanged from the previous year with metal frames and plastic frames respectively accounting for 47 percent and 52 percent of ODM revenues.
Sales of the contact lenses’ segment, which consists solely of color contact lenses under the Jil Stuart license, plunged from HK$ 137 million last year to HK$ 17 million (€1.9m-$2.2m) this year. According to the company, the category suffers from a high sales base in the previous year when the product was launched and clients needed to build up their stock. Although we could not confirm this point with the company, it is probable that the contact lens business weighted heavily on the company’s overall revenues in Japan, which went down from HK$ 180.0 million to HK$ 64.9 million (€7.3m-$8.4m).
Sales in the branded eyewear distribution segment in Asia, which represent about 20 percent of the company’s revenues, went down 12.7 percent to HK$ 179 million (€20.2m-$23.1m) last year. Sun Hing’s portfolio that currently includes New Balance, Jill Stuart and Agnès B., will be complemented with the Kenzo license as the company has acquired in the last year the exclusive distribution rights for the Japanese brand in China. Asia, mostly China, Japan, Hong Kong and Taiwan produce 97 percent of his segment’s revenue.
In its results’ announcement, Sun Hing stressed that the group keeps a solid liquidity and financial position with a cash and bank balance of HK$ 309 million (€34.8m-$39.9m) but said that it will adjust operations to cope with the current situation and the lack of visibility regarding the end of the health crisis. Measures mentioned include the strengthening of its credit risk management, the reduction in non-essential expenses and the optimization of its vendors’ trade terms. The company will also keep reviewing its brand portfolio and eliminate non-performing brands.
However, the group confirms that it will move forward with the construction of its factory in Vietnam, a project that was started in 2019 but is currently on hold due to the health crisis. It said in its previous interim report that the investment was justified by rising labor costs in China and the need to reduce its dependency on its Chinese factories in the context of the U.S.-China trade war.