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Global-Tech Appliances Announces Postponement of Plant Expansion and Implementation of New Marketing Plan.

HONG KONG--(BUSINESS WIRE)--Sept. 4, 1998--Global-Tech Appliances Inc. (NYSE: GAI) announced today that it postponed completion of the expansion of its manufacturing facility in Dongguan, China because the increased orders expected from Sunbeam Corporation have not been received and are not expected for the foreseeable future. Global-Tech believes that Sunbeam is currently unlikely to increase outsourcing of its products due to its recent announcement that it is seeking to reduce large product inventories. Additionally, Sunbeam is delaying the closing of its own plants.

Global-Tech had planned to use approximately $30 million of the funds raised in its initial public offering to expand and equip its plant. Although it had expected to complete the expansion of the physical space to 1,850,000 square feet by the end of its current fiscal year, it does not expect to complete the entire infrastructure or purchase all the equipment initially anticipated until its order flow warrants the additional capacity. It is expected that only $12 million will be expended on plant expansion during the fiscal year ending March 31, 1999, thus maintaining Global-Tech's strong cash position.

John C. K. Sham, President and Chief Executive Officer, said: "Given the recent events at Sunbeam and the consolidation in the small household appliance industry, at this time we do not think it is prudent to continue to expand our facility at the pace we had planned since we currently have sufficient capacity to accommodate additional business. We are holding back on expensive equipment orders until we can implement our marketing plan for expanding our sales. We plan to conserve the funds raised until they can be expended on a plant expansion that makes more sense. Although it appears that customers such as Sunbeam are not outsourcing their manufacturing as quickly as we had anticipated, we still believe that the long-term trend toward outsourcing will continue."

Mr. Sham continued, "We have modified our marketing plan to meet the new realities of our industry. We will market our products more aggressively to a wider variety of customers and develop additional products in more profitable consumer categories. While we continue to emphasize the development of new innovative products for sale by customers using brand names, we are also working more closely with customers who sell and advertise directly to the consumer. It is our belief that this additional exposure for our new products will encourage greater demand by consumers. Simultaneously, we are redoubling our efforts to develop new products for growing categories, such as the floor care area, and are focusing more of our sales efforts towards European customers. As part of the implementation of this program, we plan to add a high power motor manufacturing line to our factory which will increase our capacity to manufacture floor care and other products."

"Another component of our plan is to reduce the time it takes UL (Underwriters' Laboratories) to approve our new products by creating a UL-approved testing facility on our premises. With an approved testing facility, Global-Tech will be able to shorten the time it takes to move new products from the development stage to market."

Mr. Sham concluded, "Despite the efforts we are making with our new plans, it is likely that our net sales in the second fiscal quarter which will end on September 30, 1998, as well as the remainder of the fiscal year ending March 31, 1999, will be below expectations. The Company is continuing strong cost controls to sustain its margins and maintain positive cash flows."

Global-Tech is an original design manufacturer of a wide range of small household appliances in four primary product categories: kitchen appliances; personal, beauty and health care products; travel products and accessories; and garment care products. Global-Tech designs and develops proprietary new products which it manufactures for well-known household appliance companies under brand names such as Hamilton Beach(R), Krups(R), Mr. Coffee(R), Proctor-Silex(R), Revlon(R), Sunbeam(R) and Vidal Sassoon(R).

Except for historical information, certain statements contained herein are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," or variations of such words and similar expressions are intended to identify such forward looking statements. These forward looking statements are subject to risks and uncertainties, including but not limited to, the impact of competitive products and pricing, product demand and market acceptance, new product development, reliance on key strategic alliances, availability of raw materials, the regulatory environment, fluctuations in operating results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including its Registration Statement on Form F-1 which was declared effective on April 8, 1998.

 CONTACT: Global-Tech USA, Inc.
 Brian Yuen
 President & CEO
 tel: 212/683-3320
 fax: 212/725-4880
 or
 Georgeson & Company
 Peter Firestein
 tel: 212/440-9889


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Copyright 1998, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Business Wire
Article Type:Article
Geographic Code:9CHIN
Date:Sep 4, 1998
Words:812
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