The Gross Profit Margin Of Sports Shoes Will Be Improved Significantly.

Events:

In January 29th (Friday) announcement, the company's wholly-owned Affiliated Companies 361 degree Investment Co., Ltd. entered into a memorandum of understanding with the Union International Industrial Co., Ltd., and the two sides will set up a joint venture company in Jinjiang, Fujian, China, that is, 361 degree (Fujian) Shoe Plastic Technology Co., Ltd., mainly engaged in shoe sole production.

The total investment and registered capital of the joint venture company will be HK $86000000, and both partners will be funded by cash, of which 331% will account for 51% of the equity, and the joint venture will account for 49%.

Comment:

We think the news has a positive impact on the 31st degree.

At present, there is no production capacity of sports shoes, and all soles come from the third party procurement.

The investment shoe sole production is part of its vertical integration business.

The Associated company is a Associated company specializing in the design and production of plastic shoes for sports shoes. The company has over 30 years experience in designing and manufacturing plastic soles for sports shoes, providing products for several global sports shoes brands.

The establishment of a joint venture can complement each other's advantages.

By setting up a 331 degree joint venture, the 31st degree can not only control production cost better, but also internalize the profits of some sports shoes manufacturing business, and better control the quality of its products.

More importantly, the cooperation between the two sides is conducive to the improvement of the overall manufacturing capability of the 360 degree high quality sports shoes, and will be in a favorable position in the future brand competition.

Due to the fact that the partners are cash contributive, the joint venture company still needs a certain time to build new production facilities and formally put into operation. Therefore, we believe that the real impact on the performance of the 31st degree in the short term is not large, but it is estimated that by 2011, the gross profit margin of the 360 degree sports shoe manufacturing business will be significantly improved.