Another listed company is in trouble again. This one is Smart Union Group (Holdings) Limited (2700), a toy manufacturer company that went IPOed just two years ago. Yesterday two of their factories in Dongguan were shut down and more than 7000 workers were picketing outside of the factories demanding for unpaid wages that were in the range of HKD 20 million.
The company was a manufacturer for Mattel products that include Barbie and Sesame Street. The company has not been in good shape since beginning of this year. In the half year of 2008, they have reported a loss of HKD 200 million, mainly due to a flooding event in the Dongguan factory and the amount of defect products manufactured. Also, it has quite a big amount of short term liabilities that probably cannot be refinanced easily in this environment. Today, the company has appointed John Lees & Associates as the provisional liquidators for the company.
A storm is definitely blowing strongly towards small and medium enterprises (SMEs). Factories in the Pearl River Delta region will need to weather the soft demand from Europe and the US and the tightened credit environment. I expect a lot of manufacturers (even the bigger, listed ones) to go down in the coming months.
