Singapore Furniture Stocks - HLT, Man Wah, Cacola, Koda and Sitra

Furniture firms under pressure as discretionary spending dries up By Desmond Wong, Channel NewsAsia SINGAPORE: Singapore-listed furniture companies have been under pressure on worries over their earnings outlook. Profits for furniture firms listed on the Singapore Exchange have declined sharply in the last quarter because of the economic slowdown. Koda for instance, reported a drop of 78 per cent in net profit on-year for the three months ended September. The company exports mainly to the US and Europe, where demand has dried up. Even for a company like Cacola - which enjoys strong demand in the resilient Chinese market - the profits have dropped by 10 per cent. The outlook appears challenging, but according to industry-watchers, careful pricing and distribution can give Singapore furniture companies an edge. Said Chris Sanda, an analyst with the Daiwa Institute of Research: \"Man Wah is making very good sofas that can compete with the Italians and there\'s no competition as far as price points go. You get a very good sofa for about a third of the price. As far as the second advantage, it\'s really distribution. Man Wah\'s been really expanding into the US market, going direct to the retailers.\" Sofa maker, Man Wah has been able to grow its third quarter earnings by more than 13 per cent on-year. Sluggish demand from the US and Europe may weigh on the margins, but analysts say exposure to such markets has an advantage. They argue that when the turnaround comes, the recovery will be from those countries, and Singapore furniture firms which sell to the US and Europe could be among the first to ride the wave.

Attendance down 27% at Dongguan furniture show Organizers say March event drew 80,000 buyers Thomas Russell -- Furniture Today, May 8, 2009 HOUJIE, China — Organizers of the 21st International 3F Famous Furniture Fair said the March 16-20 event drew 80,000 buyers, down 27% from the 110,000 reported in attendance in March 2008. Some 8,000 attendees were from more than 70 foreign countries, down 38% from the 13,000 international buyers a year earlier. The show was held in 2.5 million square feet of space at the Guangdong Modern International Exhibition Center in the Houjie section of Dongguan, China, and also in a number of freestanding showrooms outside the exhibition center. A total of 847 furniture exhibitors from mainland China, Taiwan, Hong Kong, Germany, Vietnam and the United States showed a mix of case goods and upholstery in a range of traditional, transitional and contemporary styles. \"The exhibitors took this 3F so seriously in a way that I haven\'t seen in many years,\" said Yin Chengzhi, president of the Dongguan Famous Furniture Assn., one of 3F\'s organizers. \"So many of them have spent heavily on new product development and came out with initiatives to support their dealers and distributors in terms of promotion and staff training under the urge of keeping competitive.\" At the event, officials launched a campaign called the Dongguan Furniture Brand Strategy, a government-supported initiative to help promote 50 to 80 furniture manufacturers in the Dongguan region over the next three to five years. \"We believe this strategy will make Dongguan furniture a bigger mark in the world furniture industry and in return, it will benefit every furniture player in Dongguan,\" Chen Zhongqiu, governor of Houjie Town, said in a statement. To remain competitive during the global economic downturn, show and industry officials also said the industry must remain focused on design and other research and development initiatives. This includes developing eco-friendly products. \"Environmental protection will not be a temporary trend,\" officials said in their post-show report. \"It is believed that more and more Chinese furniture manufacturers will further enhance their awareness of environmental protection and attach importance to environmentally friendly design.\"

HTL posts $14.9m Q1 profit By JAMIE LEE HTL International Holdings bounced into the black in its first quarter after a foreign exchange gain. The sofa maker yesterday reported a $14.9 million net profit for the three months ended March 31 - reversing a net loss of $8.17 million a year ago - thanks to a $14.6 million net forex gain after derivative instruments were exercised or matured in Q1. Quarterly sales slipped 8.9 per cent to $126 million, from $138 million a year ago. But this was offset by a 14.2 per cent fall in the cost of sales to $84.1 million, and an 11.2 per cent drop in marketing and distribution expenses to $30.3 million. The results translate to earnings of 3.57 cents a share, compared with a loss of 1.96 cents per share a year ago. The company has $58.9 million in cash, 58.8 per cent more than $37.1 million in the previous corresponding period. Free cash flow - net cash generated from operating activities after deducting capital expenditure - stands at a negative $912,000, compared with a negative $10.6 million last year. \'While there are economic reports that suggest green shoots are beginning to emerge in the US economy, we believe the outlook for the rest of 2009 remains uncertain,\' HTL said in its financial statement. \'Any sustainable global economic recovery can only occur when the global banking and credit crisis stabilises.\' HTL declared a dividend of one cent a share. Its shares surged 17.5 per cent, or 3.5 cents, to finish at 23.5 cents yesterday.

KODA guiding for a poorer 3rd quarter • In its 2nd quarter (October to December 2008) results, Koda commented that the outlook for the global furniture market remained uncertain due to the cascading impact of the global recession on the US and UK/Europe markets; key markets that the Company is dependent on. • The Company also warned that 3rd quarter (January to March 2009)production would be impacted by traditional factory holidays to mark Chinese New Year in China and the Tet New Year festival in Vietnam. As such, Koda was expecting to book a loss for the third quarter. • Last week, Koda provided an update, warning that the loss previously warned would be larger than was originally expected. This was mainly due to the poor economic performance of the USA and UK which saw their economies continuing to shrink in the 1st quarter of 2009 by 6.1% and 1.9% respectively. These GDP declines were fully reflected in the furniture demand from Koda’s customers. • Besides lower sales volumes, customers have also been demanding less expensive furniture. For example, instead of full leather, a customer may be willing to settle for half leather or for fabric. This has affected price per unit and margins. Given management’s concern over credit risk, Koda has also opted not to loosen its stringent credit policy, another factor restricting sales growth. • In addition, the third quarter performance will also be affected by weaker currencies. The weakness of the Vietnamese Dong and significant weakness of the Australian and New Zealand Dollars meant lower sales derived from these markets when translated into US dollars which is the reporting currency used by Koda. • Given the necessity to provide a further update on its 3Q loss outlook, we believe that on a nine months basis, Koda is going to report a loss. This implies that 3Q loss would be significant enough to wipe out 1H09’s approximately US$0.8m profit. • The overriding factor for the loss in 3Q is likely to be a significant decline in sales while expenses will remain high as the Company is going ahead to charge pre-operating expenses in the 3Q results. • In addition, the global credit crisis has led to credit downgrades of some customers and Koda has decided not to pursue business with these customers as insurance coverage is proving to be a challenge. This will also see some potential impact on 3Q numbers but the saving grace is that most of the materials are semi-finished items and the Company could find other means to monetize them.

Man Wah reported a weaker than expected set of 4Q results. And they did not declare dividends for FY2009. Seems like the storm is not over yet for the furniture players.

But HTL actually reported a better set of earnings than expected. Although they remain cautious but they certainly sound more optimistic.