7 May 1998: Affected by both sharply reduced product prices and oversupply, Luoyang Glass Co., a mainland China float-glass maker, has reported net losses in 1997 of 223.44 million yuan (about US$ 27 …
7 May 1998: Affected by both sharply reduced product prices and oversupply, Luoyang Glass Co., a mainland China float-glass maker, has reported net losses in 1997 of 223.44 million yuan (about US$ 27 million). The float glassmaker saw a sharp decrease in the second half, against its interim losses of 45.11 million yuan. “I was shocked by the massive losses in the second half,” president and general manager Guo Xiaohuan said, who blamed excessive supply and plunging prices for the disastrous result. “We had initially insisted on not cutting prices. But we were forced to follow to avoid inventories, as the prices kept falling all the time,” Guo said. He added that the company“s target was to trim losses this year. Last year, the mainland“s glass production exceeded 168 million cases, but demand was only for 140 million cases, causing the average selling price for each case to drop 24.2%. The price has tumbled 97.32% since 1994 when the company listed. Mr. Guo said Luoyang Glass“ profitability was also hit by an increase in expenses, as it borrowed more money for expansion after exhausting listing proceeds. At the end of last year, it had debts of 1.3 billion yuan, an increase of about 300 million yuan. Net losses for last year compared with net gain of 21.61 million yuan. Sales were down 1.1% to 593.19 million yuan. Losses per share were 31.9 fen against earnings per share of 3.1 fen. No final dividend was proposed. Guo said the state planned to announce the “price law” in May in order to stop price-cutting competition among glass manufacturers. Under the proposed law, a selling price will be set based on an average production cost of the industry, plus a profit margin. Manufacturers who break the law by selling products below costs will reportedly have to compensate for the losses of their rivals. Financial controller Ren Puxian said the company“s average production cost was 52 yuan a case last year, and would fall to between 47 and 49 yuan this year, which he said was lower than some of its competitors.