Giant Manufacturing Co Ltd (巨大機械), the world’s biggest bicycle maker, yesterday said its operations were not disrupted by a fire that broke out at one of its production facilities in Taichung on Saturday.
The fire had occurred on a day off, so no employees were injured and no damage was caused to the plant or its equipment, the company said in its filing to the Taiwan Stock Exchange.
The fire was quickly extinguished by firefighters and all production and deliveries are expected to resume uninterrupted today, the company said.
Weak demand in China has continued to affect Giant’s sales this year.
In the first five months of the year, the company reported cumulative sales of NT$24.32 billion (US$755 million), down 2.79 percent from a year earlier.
Analysts expect Brexit-related foreign exchange and market shocks to add further difficulties to Giant’s earnings potential.
“We believe a recovery in China is not due until 2018, as excess inventory appears to be larger than expected,” CIMB Securities Ltd analyst Jack Lin (林泓彥) said in a note last week.
The company’s margins could also see continued declines as it implements discounting activities in China and the US, Lin said.
Despite Giant’s policy of launching new products each year, the company’s little difference or improvements on older models has made it more difficult to manage inventory and forecast demand among bike retailers, as many consumers delay purchases until the next model is revealed, Lin said.
In addition, interest in purchasing fully-assembled bicycles has been declining as more discerning consumers now prefer to order heavy-discounted components online and build their own bicycles, he added.
The expected weakness in the euro against the US dollar in the post-Brexit period is expected to impact Giant, which derived about 27 percent of its sales last year from Europe, HSBC Securities Taiwan Corp analyst Chloe Wu (吳家瑋) said in a separate note last week.
“Our tracking suggests a 9 percent depreciation in the euro against to the US dollar, with the exchange rate dropping from 1.2 to 1.1,” Wu said. “Each 1 percent depreciation in the euro would imply 2.4 percent downside to Giant’s pre-tax profits for this year.”
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