HTL'S 9M FY 2012 NET PROFIT UP 290% SINGAPORE - 6 November 2012 -Mainboard-listed HTL International Holdings Limited ("HTL"), one of the world's leading leather tanners and sofa manufacturers, today reported a rise in net profit after tax of 289.5% to US$7.0 million for the first nine months of 2012 (9M 2012) amidst the continuing global economic slowdown and challenging business conditions. The higher profitability resulted mainly from a forex gain of US$837,000, instead of a forex loss of US$5.1 million in 9M 2011.

The sustained focus on expanding market share saw top line growth rise 17.2% to US$445.4 million in 9M 2012 against US$380.1 million in the same period of 2011, driven by higher sales to North America, Europe, ANZ and Japan. Impacted by rising raw leather and production input costs, gross profit only grew 5.9% to US$146.7 million. This consequently saw gross profit margins decline to 32.9% from 36.5% in 9M 2011.

Q3 2012 vs Q3 2011

In Q3 2012, Group revenue rose 7.4% to US$148.2 million as compared to US$138.0 million in Q3 2011. Faced with increased input costs, gross profit declined 8.0% to $48.2 million from US$52.4 million in Q3 2011. Notwithstanding a 67.1% reduction in income tax expense, the higher forex loss of US$1.6 million (Q3 2011: US$0.7 million) resulted in net profit declining by
7.7% to US$1.4 million against US$1.5 million in Q3 2011.

OPERATIONS REVIEW - 9M FY 2012

Turnover from the Group's sofa business grew by 20.4% to US$420.7 million in 9M 2012 versus US$349.4 million in 9M 2011. Growth in all markets except Greater China, was led by North America (up 49.3%), Europe (up 12.5%), ANZ (up 17.6%) and Asia, mainly Japan (up 17.0%). Europe remains HTL's largest single market with increased sales of US$203.5 million, up from US$180.9 million a year earlier. Sales to North America climbed to US$102.8 million from US$68.9 million in 9M 2011.
Rising input costs especially from rising leather prices, remained a drag on operating profit before net forex and tax. This declined by 12.4% to US$13.4 million from US$15.3 million (9M
2011).
The change in source of revenue by Domicil GmbH to its franchisees in Germany and lower translation of Euros to US dollars (the Group's reporting currency) caused Home Furnishing Business revenue to decline by 19.2% to US$24.7 million in 9M FY 2012 versus US$30.6 million in 9M FY 2011. (If not for these factors, HFBU's turnover for 9M FY 2012 would have been
higher at US$30.1 million but marginally lower than US$30.6 million in the previous year.) Consequently Home Furnishing Business net operating loss before net forex and tax was reduced to US$1.1 million (9M 2011: loss US$3.0 million).
To fund the Group's increased trade and other receivables (up US$6.8 million to US$68.6 million) and increased inventory (up US$28.1 million to US$197.5 million), net borrowings rose by US$15.7 million to US$68.9 million. This has resulted in a negative free cash flow of US$10.4 million and a rise in net gearing as at 30 September 2012 to 40.5% from 31.8% at 31 Dec 2011.

OUTLOOK

For the rest of the year, the operating environment remains challenging and the forex market will continue to be volatile.
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About HTL International Holdings Limited

HTL International Holdings Limited is one of the world's leading leather tanners and manufacturers of quality leather upholstered furniture. It exports more than 95 per cent of its products to over 50 countries, to Europe, Asia-Pacific, USA and the Middle East. Its marketing offices are located in the USA, UK, Germany, China, Taiwan, Korea, Australia and Singapore. It also has a sales distribution network in the USA, UK, Germany, Japan and Australia.
For more information, please contact: Mr Tay Kheng Hee
Director, Corporate Services
Tel: 6864 7312
Handphone: 9664 9460
Email: kh.tay@htlinternational.com

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