htlSofaEuropean revenues declined at major leather upholstery source HTL International in the lead up to its planned sale to one of China’s largest furniture companies.

The Singapore listed sofa manufacturer said consolidated revenues declined 9.1 per cent to US $454m in the year to end December, with Europe — its largest market — one of its weakest territories.

Sales here declined 12.6 per cent to $198.6m, the company said, as global losses before foreign exchange movements widened to $4.4m (2014: $2.4m).

Gross margin weakened 260 basis points to 28 per cent which the company attributed to higher raw material and labour costs in China. It said leather hide prices and freight rates had since eased.

Foreign exchange rate gains in each of the past two years meant the manufacturer made $2.5m (2014: $10.8m) at the pre-tax line.

Cabinet furniture and flooring group Guangdong Yihua Timber Industry Co. announced late last year it planned to acquire HTL through a Hong Kong subsidiary company, firming up its approach in January and saying it hoped to complete a deal for around S$400m, about £203m at today’s exchange rates.

If the deal goes ahead, it would see HTL delist from the Singapore Stock Exchange and become part of the Guangdong Yihua group, which currently operates factories spanning 32 million sqft across multiple locations in China.

Its divisions produce wood flooring as well as living, dining, occasional and bedroom cabinet with the group having sales approaching the equivalent of £500m.

* HTL’s reporting currency is the US dollar, S$ means Singaporean dollar