Rechi posts handsome earnings in first six months

Taipei, July 26, 2004 (CENS)--Rechi Precision Co., Ltd., Taiwan's largest and the world's fourth-largest manufacturer of air compressors, posted earnings of NT$450 million (US$13.31 million at US$1:NT$33.8) in the first half of this year, reaching 110.3% of this year's annual profit goal.

Based on its current paid-capital of NT$2.37 billion (US$70.11 million), Rechi Precision garnered NT$1.95 (US$0.05) in earnings per share in the first half of this year.

Rechi Precision currently concentrates on the production of scroll compressors, refrigerant rotary compressors, reciprocating- and screw-type air compressors, and golf club heads.

Thanks to the tight supply of refrigerant air compressors globally, many world-class manufacturers in this line have successively upward adjusted their product prices and Rechi Precision will soon follow suit by increasing quoting prices by 10%. The company will boost production capacity next year to meet the booming demand for the products worldwide.

Because of the price hike, Rechi Precision anticipated to score pretax earnings of between NT$750 million (US$22.18 million) and NT$800 million (US$23.66 million), or between NT$3.5 (US$0.1) and NT$4 (US$0.11) in EPS, next year. Seeing the brilliant fundamentals, foreign investors are rushing to increase shareholdings in the company. It is estimated foreign investors have bought together purchased a 5% stake in Rechi Precision over the past two months.

Rechi Precision said it has to run production lines round-the-clock to meet the influx of orders. The company said it would increase the quoting prices of its products by over 10%, following the steps of mainland Chinese rival competitors, who have recently made a 20% price hike.

The company is facing a glut of orders because the world compressor market is encountering an annual supply shortfall of four million units. To meet the excessive demand, the company is making all-out efforts to expand production capacity in the mainland.

Seeing the influx of orders, over the past several months the company has been making all-out efforts to boost production capacity by cooperating with mainland Chinese large-sized manufacturers of home appliances, including Haier Group.

The company said it would cooperate with Haier to set up a joint-venture compressor assembly plant in Qingdao, Shangdong Province by the end of this year. With a paid-in capital of US$15 million, the joint venture with Haier will have an initial annual output of 2.5 million compressors. In three years, the plant will see annual output reach five million units.

In addition, the company has recently broken ground for a joint-venture plant of compressor pumps in Huizhou, Guangdong Province with mainland's TCL Group. The plant is expected to begin production sometime in December this year.

If construction of these above-mentioned joint-venture plants goes smoothly, Rechi Precision will see annual output mount to between 7. 5million and eight million air compressors next year.

Rechi President Lee Wen-chin said his company currently has three production lines, each with an annual output of 1.5 million compressors. If these production lines run at full capacity, the company will be able to see annual output reach 1.9 million units for each production line.

To increase production capacity to meet the increased demand for air compressors the world over, the company plans to build an assembly plant somewhere in eastern China in the foreseeable future. With the proposed new plant, the company targets to meet the goal of rolling out 10 million air compressors yearly.

At present, Japan's Matsushita Group ranks No.1 in the world's air compressor industry with annual output hitting 11 million units, followed by South Korea's LG Electronics with 10 million units, and Hitachi Shanghai with seven million units.