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Bright Market Outlook Drives Kao Fong to Take out Loan for Expansion

2014/07/01 | By Ken Liu

Kao Fong Machinery Co., Ltd., a subsidiary of Hota Industrial Mfg. Co., Ltd., has signed a syndicated loan of NT$1.1 billion (US$36.6 million) with eight Taiwan-based banks to finance its expansion amid promising market outlook.

The company projects its revenue for this year to rise 23% year on year, to NT$2.3 billion (US$76.6 million), and after-tax net income for the same year to hit an all-time high of NT$1.8 per share. The estimates are based on recovering business cycle and the company's success building distribution networks in Europe and the Americas.

Last year, the company made NT$1.5 per share on revenue of NT$2 billion (US$67.3 million), both new highs.

Industry executives estimate Kao Fong and Hota to generate combined revenue of NT$6.8 billion (US$226 million) this year, surging around 18% from last year's.

Kao Fong is constructing an NT$600 million (US$20 million) factory at the Central Taiwan Science Park to build high value added heavy-duty double-column machining centers, five-face machining centers and five-axis machining centers, to begin production in February 2015.

The company will budget NT$350-400 million (US$11.6-13.3 million) of the loan to build the factory this year. It has spent around NT$90 million (US$3 million) to buy Japan-made 10-meter-column five-face machining centers and horizontal boring machines to enhance processing precision of back-end production.

Part of the latest loan will go to paying down a previous loan this year. Previously the company signed a five-year, NT$800 million (US$26.6 million) loan with the same eight banks, including Land Bank of Taiwan, First Bank, E. Sun Bank, Chang Hwa Commercial Bank, Hua Nan Bank, Industrial Bank of Taiwan, and EnTie Bank. Kao Fong has spent NT$500 million (US$16.6 million) of it.

According to company executives, Kao Fong still has around NT$500 million (US$16.6 million) of unfilled orders as a result of rising sales, judging from recovering car-making industry in Europe, the United States, and  China as well as brightening outlook of the 3C (consumer electronics, communications, and computer) and information-technology industries, all of which drive demand for machine tools.

They feel that over the next three years the global car-making industry will see considerable growth after years of tepid demand since the 2008 financial crisis and the 2010 oil crisis, and that a new round of car replacement purchases is taking place worldwide with renewed optimism in the aftermath of those disasters. (KL)

2009-2013 annual operation results at Kao Fong

Year

Revenue

After-tax net income

Earnings per share

2009

NT$490M

-NT$31M

-0.37

2010

NT$1.3bn

NT$90M

NT$1.08

2011

NT$1.6bn

NT$64M

NT$0.77

2012

NT$1.3bn

NT$19M

NT$0.22

2013

NT$2bn

NT$130M

NT$1.5

Source: the company