Gelonghui, May 24 | Hengfu Holdings (00643.HK) announced that the management team plans to further reduce the scale of production in mainland China, reduce the size of the manufacturing plant in Heshan (“Heshan Plant”), and appoint overseas subcontractors for its production process, mainly due to reduced labor costs and management expenses, as well as changes in customer procurement strategies. The Heshan factory is owned by Heshan Hengfu Garment Co., Ltd., a wholly-owned subsidiary of the company. As far as the results of this move are concerned, it will help reduce the Group's costs in the long run, but the Group will incur several restructuring costs this fiscal year.
The above commercial arrangements have been proposed to and supported by the Group's major clients. As part of the arrangement plan, the Heshan Plant will not process any further production orders from the Group after completing the existing production order (estimated delivery date is May 2024). Production orders originally distributed to the Heshan plant (the original delivery date is after May 2024) will be distributed to overseas subcontractors, mainly business partners of the Group, which have sub-contracted plants in Cambodia and Indonesia.
As far as the number of employees at Heshan Hengfu Garment Co., Ltd. is concerned, the labor directly responsible for production will be reduced to a minimum. The Group will retain office staff (including purchasers and logistics) to support the Group's garment business operations.