Evergreen Products Group Announces 2019 Interim Results

Enhancing Production Efficiency after the Completion and Trial Operation
on Bleaching and Dyeing Facilities Since Late 2018

(Hong Kong, 28 August 2019) – Evergreen Products Group Limited (“Evergreen” or the “Group”; HKEX stock code: 1962), a leading global manufacturer of hair goods, has announced its 2019 interim results, highlighted by continued high contribution from the Bangladesh Factory for the six months ended 30 June 2019 (“1H 2019” or the “Period”).

During the Period, attributable to the strong overall market demand for wigs and hair products and long-standing and stable business relationships with its existing clients, the Group’s revenue increased to HK$375.3 million. Despite the monthly minimum wage in the Bangladesh Uttara Export Processing Zone (“UEPZ”) increasing by 44% from 5,992 Taka to 8,650 Taka per worker effective on 1 December 2018, the Group has adopted various cost control measures and managed to maintain gross profit at HK$125.6 million, slightly dropping by 4.6% as compared with the same period in 2018. Net profit for the Period was HK$47.9 million. The Board has declared the payment of an interim dividend of HK1 cent per Share for the Period.

To minimize the impact of the wage rise, Evergreen has adjusted the invoice price upward on new orders received since January 2019. For those customer orders confirmed during 2018 and shipping in 2019, the respective profit margins of the Group have inevitably been affected, with the UEPZ wage increase (44%) resulting in the slight drop in gross profit (4.6%). Despite the implementation of the new monthly minimum wage rate at UEPZ Bangladesh of 8,650 Taka (around USD100), the labour cost there is still the lowest among operations in all other Asia Pacific countries.

The recent Sino-US trade war has no direct negative impact on the Group, as Evergreen’s exports from Bangladesh are not subject to the new tariff imposed by the US. During the Period, the Group has noticed the significant increase of new sample orders from existing and new customers on the US market. Should these sample orders be acceptable, these customers will confirm orders in bulk quantities. This is a positive sign that US customers are diversifying the origins of their suppliers to cope with the impact of the trade war.

Meanwhile, the Group continues to adhere to the shift in deployment strategy and has further scaled down its production capacity in China so as to benefit from lower labour costs and other production costs.

Mr. Felix Chang, Chairman, Chief Executive Officer and Executive Director of Evergreen, said, “Financial performance of the Group in the second half of the year is expected to be restored to the original upward trend. We are undertaking various measures to improve and restore the efficiency.”

In terms of the staffing policy, the Group has stopped hiring new workers inside the UEPZ with a higher minimum wage rate. Instead the Group is migrating workers to its production plants outside UEPZ as well as hiring new workers outside UEPZ with a lower wage rate.

Following the completion and smooth commencement of operation on the new bleaching and dyeing complex since late 2018, the Group is focusing on producing high average selling price (“ASP”) and high margin items, such as real human hair products. ASP and margin of these products are 5 to 8 times higher than its traditional synthetic products which represented around 70% of its total revenue in the past. The Group expects a significant improvement on future margins upon the successful shift in product mix.

The construction of new facilities in Bangladesh will continue at full speed until the end of 2019 with planned additional gross floor area in its production facilities amounting to around 1 million square feet. Thus, the Group is enjoying economies of scale and achieving cost efficiency.

Mr. Chang said, “With full support from the Bangladesh factories, we will keep setting up sales offices in other Asian countries to sell high-end human hair extensions under our self-owned brands with an aim to keep boosting sales and profit margins. In addition, we will also search for opportunities to integrate with one-stop hair care centres which specialise in providing tailor-made toupees to treat hair loss in Asian countries such as the PRC and Japan. With this downstream integration in progress, we are confident that the gross profit margin and net profit will be boosted to the next level.”

Business Review

Evergreen offers a comprehensive product portfolio including wigs, hair accessories and others, high-end human hair extensions and Halloween products that target different ethnic groups as well as the Halloween market. During the Period, the United States continued to be the Group’s principal market, representing 82.3% of its total revenue.

In 1H 2019, market demand for the Group’s wigs and hair products continued to grow, and such demand was satisfied by the rapid increase in production capacity of the Bangladesh Factory. The Bangladesh Factory remained as the main revenue source of the Group, bracing its profitability growth. During the Period, revenue generated from hair goods made at the Bangladesh Factory accounted for 92.1% of the Group’s total revenue.

During the Period, revenue of wigs, hair accessories and others amounted to HK$260.6 million, remaining as the Group’s key product segment accounting for 69.4% of its total revenue. In view of the higher margin of high-end human hair extensions, the Group strategically and gradually shifted its focus to this high profit segment. Revenue of high-end human hair extensions thus increased 14.0% to HK$86.4 million, attributable to a higher sales volume driven by the increased production in Bangladesh. Meanwhile, thanks to a higher sales volume and ASP of Halloween products, revenue of this segment increased 11.0% to HK$28.3 million.

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About Evergreen Products Group Limited
Evergreen is a leading global manufacturer of hair goods, including wigs, hairpieces, braids and high-end human hair extensions. Since 1962, when its founder commenced trading wig products, it has been operating a comprehensive business model that covers various aspects of the hair goods business, from initial design, research and development to final delivery. More than 90 percent of the Group’s production is conducted at its three production centres in Bangladesh, which enables the Group to benefit from low labour costs and a large labour pool, facilitating greater economies of scale. Evergreen also has two production centres and one R&D centre in China. For more details about Evergreen, please visit the Group’s website: www.epfhk.com

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