Hiroca Holdings Ltd (廣華控股), a Taiwanese automotive components maker with operations in China and Mexico, has received regulatory approval from China to operate its new business unit in Shanghai, allowing it to become part of SAIC Motor Corp’s (上汽集團) supply chain.
The firm said it would become a tier-one supplier to SAIC, designing and manufacturing for one of China’s largest car groups.
The new Shanghai operation would also help the company serve clients in eastern China, Hiroca said at an investors’ conference organized by the Taiwan Stock Exchange on Thursday last week.
Cayman Islands-registered Hiroca is engaged mainly in the sales and manufacturing of automotive interior trim parts, as well as plastic, fabric and leather decorations.
The company has several operations in southern China, supplying products to Toyota Motor Corp, Honda Motor Co and Nissan Motor Co. It also has operations in central China to serve customers there.
Sales in China accounted for 80.53 percent of Hiroca’s total revenue in the first three quarters, with the remaining 19.47 percent coming from other markets, the company said.
In the third quarter, net income reached NT$101.8 million (US$3.29 million), down 47.59 percent from NT$194.23 million a year earlier and the lowest in two years, with earnings per share of NT$1.21.
Gross margin fell annually last quarter from 25.93 to 23.22 percent and operating margin dropped from 11.2 to 7.32 percent.
The company said it attributed the decline in profits to the Chinese yuan’s depreciation, product-mix adjustments, rising wages and higher operating expenses.
Cumulative net income in the first three quarters totaled NT$438.51 million, down 20.8 percent annually from NT$553.69 million, with earnings per share of NT$5.23.
Hiroca said that stricter environmental standards in China and the trade war between China and the US might pose a risk to the firm’s operations in the near term.
“We are waiting for more information from Chinese authorities regarding environmental policies and are cautiously observing the negotiations between China and the US,” chief financial officer Huang Sheng-chang (黃盛昌) was quoted by local media as saying at the conference.
Hiroca reported consolidated sales of NT$709.1 million for last month, up 0.04 percent year-on-year, with cumulative sales in the first 10 months increasing 4.13 percent from a year earlier to NT$6.7 billion.
In the long term, the three major Japanese brands’ plans of expanding production in China by 2022 could be a positive catalyst for Hiroca’s development, the company said.
Japanese automakers account for 71.68 percent of the company’s revenue, compared with 20.14 percent for European and US brands, it said.
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