Radica Games expects China manufacturing costs to increase (RADA 2Q05 conf call quotes)

Includes: CESV, RADA, WMT
by: Ezra Marbach

Radica Games (ticker: RADA) President of Asia Operations David Howell talked about rising labor costs, the timing and size of further currency re-valuation and the likelihood of increased manufacturing costs in China. Here are some key quotes (from management's Q2 2005 conference call):

On Labor Costs in China

....for us labor costs are up roughly 14%. We were actually expecting to be a little bit higher.

....the China government put up the minimum wage from March of this year by a higher percentage than that. But object obviously if minimum wages go up it don't mean everything else goes up. We're seeing about a 14% -- increase at the moment.

On Manufacturing Costs

....I can see the China government becoming more and more concerned with environmental issues. They're going to be enforcing factories to look after their own environmental area, which I think may increase some of the costs in mfg in China but not a very large impact.

On Currency Re-Valuation

....the Chinese government are very good at telegraphing what they're going to do. They've made some pretty clear statements that say as you read the Chinese press and see the press in Hong Kong over year they're been coming out with a lot of statements that say don't even consider any new reevaluation during the nix 6, 7 to 9 months.

....I don't think we're going to see anything happening until some point in 2006 where there may be some minor corrections....but I doubt if there will be any major movement.

(Quotes are from the CCBN StreetEvents transcript.)

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