Solartech International Holdings plans to diversify from its core business of making wiring for white goods into car parts manufacturing in the mainland in an attempt to boost weak company profits.
The Hong Kong-listed firm plans to make a short cut into China's car parts industry by acquiring a Brazilian manufacturer with a track record in that field.
Solartech would build a factory in the mainland to produce wire harnesses for cars, said finance director Ronald Lau Man-tak. The plant, which the firm hopes to start production by year-end, would be near a large production base for well-known international car brands.
'We can bring the track record of the Brazilian firm back to China and say to the car industry: 'Let me in,'' Mr Lau said.
Solartech announced plans on April 17 to buy Brascabos, a Brazilian manufacturer of power cords and wire harnesses, for US$10 million from US white goods giant Whirlpool.
Brascabos has an annual turnover of US$40 million, consisting mainly of power cords and wire harnesses for Whirlpool's appliances and US$5 million of wire harnesses for several international car brands.
'By [next year] we expect car parts will make significant contributions to our profits and revenue,' said Mr Lau. He said the gross margin on automotive wire harnesses was more than 50 per cent.