KUALA LUMPUR: Maxwell International Holdings Bhd, a China-based sports footwear designer and manufacturer, expects to post better results for the financial year ending Dec 31, 2015 (FY15) on a recovering global economy which would help boost its sales to the United States and Europe — its two major export markets.

Its chief executive officer Xie Zhenan said 2014 was a bad year for the group due to a slow global market.

“It was even worse than the 2008 global financial crisis,” he told reporters after the group’s extraordinary general meeting (EGM) yesterday.

Maxwell (fundamental: 2.5; valuation: 1.2) saw its net profit plunge as much as 56% to RM18.18 million in FY14 from RM41.71 million the previous year, mainly due to lower sales. Its gross profit margin also contracted to 21.4% per pair of shoes from 23.4% in FY13.

Xie said although the group had benefited from low raw material costs such as rubber in FY14, demand for shoes was weak.

The group is expecting a better performance in the third and fourth quarters of FY15 as the global economy improves in the second half of the year.

However, he did not reveal the group’s growth projections for FY15, except to say that “this year will be a better year”.

“We have been communicating with our existing customers and understand that they are willing to place more orders this year in light of a better market condition,” said Xie. 

He also said Maxwell’s strategies for turning its business around this year are to focus on keeping its loyal customers, while investing in research and development.

“Our customers are mainly long-term customers who have worked with us for many years. So, for now, our focus is to maintain good relationship with them.

“We will not aggressively explore untapped markets, although we are open if there is any business opportunity,” Xie added.

Maxwell’s core business is in the design and manufacture of a wide variety of high-quality sports footwear, including court sports, running and casual shoes under original equipment manufacturer (OEM) and original design manufacturer (ODM).

Its customers include international brands US Polo, Kappa, Fila, Skecher and local brand Yonex. Its production line is based in China, but goods are exported to the US and Europe which constitute about 35% of its revenue respectively, while the remaining 30% is exported to Latin America, the Middle East and Asia.

On its new plant which is under construction in Henan, China, Xie expects it to be completed by the end of June.

He said the reasons for the slow progress were mainly due to the cold weather and also a slow economy which had put the group’s financials under pressure.

Xie noted that the plant comprises only the first phase of its development in Henan. The plant will take up one-third of the 173453.55 sq m of land there. The cost of the plant and equipment is estimated to be about 200 million yuan (RM118 million).

He said the company has yet to consider the second phase of the development, adding that “we have to think carefully”.

Earlier at the EGM, Maxwell shareholders passed its bonus share issue of up to 200 million warrants on the basis of one warrant for every two existing shares in Maxwell to be held on an entitlement date to be announced later.

“The proposed bonus issue is a way for the group to reward our shareholders,” Xie said.

Maxwell shares closed down 2.33% at 21 sen yesterday, giving it a market capitalisation of RM83.55 million.

The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Financial Daily, on March 10, 2015.