Risk factors for
The tools group (” UTcG “) business has many risks. The main risks affecting the UTG business are as follows:
The impact of manufacturing conditions
The main business of UTcG is to manufacture and sell industrial consumables. Most of its customers are in manufacturing and use our products for processing. UTcG’s business is highly dependent on global manufacturing. Weak manufacturing activity could have a negative impact on UTcG’s financial performance.
Rely on tool sales, especially drill bits
The combined sales of cutting tools, especially the drill bits, have almost taken over all of UTG sales, and this business model will last for a while. As a result, a reduction in demand for a drill may have a negative effect on financial results. More recently, printed circuit boards require higher technology and quality, as the wring density is increased in the following orders, but UTG determines its lead in this field to help its customers. UTG, meanwhile, continues to increase sales of hard alloy end mills and thread rolling in other markets.
Asian business dependence
As the global economic centre is shifting to Asia, it is inevitably dependent on its Asian operations, which account for a large chunk of UTcG’s sales. Now, UTcG has been beefing up its Asian production capacity to meet positive demand. The political, economic and social turmoil in Asia, and the delay in Asia’s enhanced plans, could have a negative impact on the business and financial conditions of UTcG.
The trend of unit price decline
Because of China’s low-cost manufacturing, PCB manufacturing faces severe price competition. Although UTG customers attach more importance to quality and after-sales service than price, we can’t ignore the decline trend of unit price. If UTG does not respond adequately to changes in the business environment, the financial situation of UTcG is likely to be affected. UTcG will continue to strive to maintain its high performance, not just to enter low price competition, but to strengthen its quality, technology, services and supply capabilities.
Raw material prices have risen, notably tungsten carbide
The main raw material of UTcG products is one of rare metals, tungsten carbide. The price of raw materials has gone up recently. UTcG is trying to buy the raw materials steadily. However, the sharp rise in raw material prices could affect UTcG’s finances.