Chairman’s Message
Dear Shareholders,
I am pleased to present the annual report of Luxking Group Holdings Limited (“Luxking” or the “Group”) for the financial year ended 30 June 2024 (“FY2024”).
Following depressed market conditions in FY2023, business sentiment in China and overseas markets gradually picked up during the first half of FY2024. While this momentum appeared to have slowedi n the second half of FY2024, the Group still staged a turnaround to report a net profit of RMB10.3 millionon higher revenue of RMB553.5 million in FY2024. This performance can be credited to Luxking’s ability to swiftly capitalise on the market recovery, thanks to the Group’s continuing efforts to bolster its customer network as well as expand its manufacturing capacities and capabilities.
The Group’s revenue climbed 11.7% to RMB553.5 million in FY2024 as demand conditions improved in both domestic and overseas markets, especially during the first half of the financial year. As a result, the Group registered a broad- based increase in sales across its three business segments.
The biaxially oriented polypropylene films (“BOPP films”) segment posted a 3.3% increase in sales to RMB194.8 million in FY2024. Sales of industrial specialty tapes (“IS tapes”) jumped 19.7% to RMB191.3 million while the general purpose tapes (“General tapes”) segment recorded a 13.7% increase in sales to RMB167.4 million in FY2024.
As a result, the BOPP segment’s revenue contribution moderated to 35.2% in FY2024 while the IS tapes accounted for a larger 34.6% of Group revenue. The General tapes segment made up the remaining 30.2% of revenue in FY2024.
The Group also achieved higher gross profit margin of 15.4% in FY2024 compared to 12.1% in FY2023. This was attributed mainly to a change in product sales mix, an absence of inventory write-down and cost efficiencies that arose from the start of in-house production of Polyethylene (“PE”)-coated paper and release liners which are raw materials for the manufacture of IS tapes and General tapes.
As a result of higher revenue and gross profit, the Group posted net profit of RMB10.3 million in FY2024 which represented a reversal from the net loss of RMB0.9 million in FY2023.
Looking ahead, the Group envisages the operating landscape to remain challenging due to uncertain economic conditions, increasing operating costs and higher raw material costs. Business demand in the Group’s domestic market may be weighed down by concerns of a tepid outlook for China’s economy. Besides soft conditions in global markets, geopolitical tensions in Europe and the Middle East may also continue to result in supply chain disruptions and cause greater uncertainty in overseas markets served by the Group.
In view of the potential headwinds and a highly competitive landscape, the Group maintains a cautious outlook for FY2025. To build a stronger foundation for long term growth and resilience, the Group will continue to focus on these key strategies -- Maintain competitiveness of its products through R&D and customisation to meet customers’ requirements; Strengthen customer relationships through active engagements to better understand their needs and keep abreast of market trends; Expand customer network by building stronger sales teams and participating in trade shows and; Continually raise production efficiency and improve operational costs through appropriate investments and upgrades in equipment and machinery.
For the BOPP films business, the Group expects market conditions to be soft amid an increasingly competitive environment. As such, it plans to continue adopting a flexible sales strategy and align its production mix of standard and high-end BOPP films according to prevailing market demand.
Competitive pressures are also expected to heighten within the Group’s IS tapes and General tapes segments. The Group foresees the business climate for these segments in FY2025 to remain similar to the slowe rconditions witnessed during the second half of FY2024.
For the IS tapes segment, the Group’s strategy is to sustain its leading position in core customer markets – smartphone/ consumer electronics, and home appliances industries– by strengthening existing relationships and winning new customers, as well as working on tailored products for customers.The Group is also leveraging its R&D capabilities to develop new products for the automotive industry which can become an additional revenue driver for the IS tapes business in future. Presently, the Group is undergoing product trials with certain customers in the automotive industry. In view of growing demand for customised IS tapes across various end-user industries, the Group intends to step up its marketing efforts to capitalise on opportunities in this area.
Similarly, the demand for customised products is also emerging in the General tapes business. As such, the Group plans to refine its sales strategy to tap the market potential for tailor-made General tapes, while pursuing new business leads to expand its customer pool and gain larger market share. The Group will also continue to improve cost efficiencies to raise the competitiveness of its products.
To build long term sustainability, the Group has been keeping the momentum for the development of its second manufacturing plant in Hubei Province over the past two years. This extension into the northern region of China will not only help to improve the Group’s local support to existing customers, the Hubei plant will also place Luxking in a prime position to reach new customers and markets as well as enlarge the Group’s overall manufacturing scale in China.
The first two manufacturing lines– PE-extrusion coating line and silicone coating line – at the Hubei plant commenced operations in FY2023. These new facilities further increase the Group’s vertical integration as the PE-coated paper and release liners are used internally for the manufacture of adhesive products. This investment is paying off as the Group reaped cost savings for its IS tapes and General tapes businesses during FY2024.
The ongoing developments at Hubei plant during FY2024 included the completion of a Multi-use Complex, as well as interior works for production units, building of ancillary facilities and installation of variouse quipment and machinery to position for the production of IS tapes there. These machinery also included adhesive manufacturing systems and adhesive tapes production lines.
The new IS tapes facilities are presently in the testing phase with trial production targeted to commence during the first half of FY2025. With a larger manufacturing capacity, the Group will be better placed to expand its current product range and address potential demand from existing and new customers to spur the growth of its IS tapes business.
Together with the construction works for new warehouses and other peripheral facilities and systems, the Group incurred capital expenditure totalling around RMB21 million for the aforesaid developments at its Hubei plant during FY2024. Moving into FY2025, the Group has earmarked around RMB9.5 million to complete the warehouses, and for the purchase of other equipment to support the IS tapes business.The Group will also continue to exercise prudence by developing the infrastructure of its Hubei plant in phases according to the market situation.
At its factory in Zhongshan, the Group installed two new adhesive coating lines during the second half of FY2024. These lines have already contributed positively to the overall production capacity and efficiency of its IS tapes and General tapes. The Group also continued to upgrade existing equipment and machinery at its Zhongshan factory to enhance production flow, efficiency, capacity and quality. In total, the Group made capital investments of around RMB5 million during FY2024 for the installation of new adhesive coating lines and other equipment at the Zhongshan factory.
In parallel with its initiatives to drive financial performance, the Group continues to emphasise its commitment to combat climate change by incorporating sustainability and climate resilience factors into its business strategy. This will help the Group to increase its resource usage efficiency and also reduce the environmental impact of its operations. A case in point is the Group’s investment in two new adhesive coating lines at Zhongshan factory during FY2024. These production lines, which have improved overall operational efficiency and optimised energy consumption, underline the Group’s continual efforts to seek avenues that can reduceits carbon footprint. Luxking has embarked on its Taskforce on Climate-related Financial Disclosures (“TCFD”) reporting journey and is committed to improve its disclosures on the Group’s climate governance, strategy and risk management.
Appreciation
At this year’s annual general meeting, Mr Chng Hee Kok will step down as Lead Independent and Non-Executive Director of Luxking. On behalf of the Board, I would like to record my appreciation to Mr Chng for his valuable contributions and counsel over the years. I would also like to thank my fellow Directors for their guidance and contributions.
We are pleased to welcome Ms Kwok Meei Ying, Monica who joined the Board on 6 September 2024 as Independent Director. Her vast corporate experience will bring value to the Board.
Last but not least, the Board wishes to extend our gratitude to the Group’s management and staff for their dedicated service, hard work and contributions to Luxking. We would also like to express our appreciation to Luxking’s shareholders, customers, suppliers and business partners for their continued trust and support.
Leung Chee Kwong
Executive Chairman and Chief Executive Officer
23 September 2024
