[SINGAPORE] When Formula One (F1) comes to town next year, the venue might not be its only Singaporean connection. Alloy wheels maker YHI International is now well-positioned in its race for a sponsorship deal with F1.

The company yesterday said it is in advanced talks to supply its Advanti Racing alloy wheels for a team in next year's F1 motor race. The one-year deal, which comes with a two-year renewal option, will see the firm supplying 400 alloy wheels to the race team next year. In addition, YHI has also set aside some US$2 million, on top of its annual US$700,000 advertising budget, to promote the Advanti brand for each of the next three years.

At an interview, YHI's managing director Richard Tay said the branding efforts will hopefully raise YHI's competitiveness and improve its gross margins. "The Chinese producers are selling their wheels at very low prices. So the only way to compete with them is to build up our own brand capital," he explained.

YHI said Advanti is already a top brand for wheels in China, but the company hopes to grow its brand equity globally. It is targeting markets in the US, Europe and Japan, among others. The aim is to grow the sales contribution from YHI's manufacturing business to more than 50 per cent from the current 36 per cent in three years' time, said Mr Tay.

YHI also provides contract manufacturing services for players like OZ SpA, which is now 35.5 per cent owned by the company. Associate OZ has also been involved in several F1 racing events, with its alloy wheels used by F1 racing cars like BMW and Renault.

To meet the higher demand in future, YHI plans to raise its annual wheel production capacity to 4.3 million units in 2009, from the current 2.4 million units.

Meanwhile, YHI reported a 41.6 per cent drop in net profit to $6.4 million despite a 6.4 per cent rise in sales to $108.5 million for the quarter ended June 30. Basic earnings per share was 1.1 cents - down from 1.88 cents a year
earlier. On a half-year basis, net earnings also fell 27.9 per cent to $11.6 million, while turnover rose 3.4 per cent to $204.5 million. The company attributed the drop in quarterly profit to a one-time gain in negative goodwill in the year-ago period. Excluding this, its quarterly earnings would have increased by 14.8 per cent, it said in a statement.

During the period, its turnover from the manufacturing business rose 28.9 per cent to $39.3 million, largely a result of increased output from added production capacity in Suzhou, China. Sales from the distribution business dropped 3.1 per cent to $69.2 million, primarily due to the exclusion of Yokohama tyre sales in China after the company formed a joint venture entity in which it has a 49 per cent stake.