Cotton Prices Hit A 10 Year High Of &Nbsp; Home Textile Stocks Are Expected To Raise Prices.

With China

The first textile network data show that as of September 27th, China's cotton price index (CCINDEX328) rose 611 yuan / ton to 21 thousand and 300 yuan / ton.

If calculated at the price of 14 thousand and 900 yuan / ton in January 4th, cotton prices have risen by 43% this year.

What is even more frightening is that rising cotton prices virtually compress the profit margins of downstream cotton spinning enterprises.

In response, the national development and Reform Commission has jointly held 7 ministries and commissions such as the Ministry of Finance and the Ministry of agriculture yesterday to hold a nationwide teleconference on cotton work to deploy cotton work in 2010.

Reporters noted that according to the Luo Lai home textile prospectus, the company's main raw materials are grey cloth and filling material, and filler materials include cotton, chemical fiber and so on.

In the first half of 2009, grey cloth accounted for 82% of the operating cost and accounted for 7.5% of the filling material.

As a matter of fact, the main raw materials for the home textiles of Meng Jie and the three pillars of Luo Lai are also made up of grey cloth and filling materials.

This means that the rising price of the upstream cotton is bound to push up the purchasing cost of the company, or ultimately affect the business performance.

The daily economic news first called fuanna yesterday, and its secretaries Hu Zhenchao said that the company will adopt the two measures to deal with the upstream price increase.

The first is the increase in price in batches. In fact, both the franchise and the direct operation have already started. The two is to increase the reserves of raw materials, which is the main reason why the company reported negative cash flow per share.

It is worth noting that the company's interest rate in the future will not drop, but the impact of upstream price increases on performance is really not good.

Chen Shulong, director of securities affairs of Meng Jie home textile, told reporters that the price of cotton has gone up, and the company has considered the price of the product.

In the future, the new products will be introduced regularly, so as to raise prices in batches.

However, because the bargaining power of the company itself is relatively strong, and the purchasing department will reserve ahead of the trend of raw materials, the high cotton price has little effect on the performance.

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Greater pressure on gross margins

So what is the impact of the upstream price increase on the cost? Even if the branded domestic textile companies have to raise their prices one by one, will the downstream be willing to take over?

A researcher of cotton textile information network thinks that the price of raw materials such as cotton yarn and grey cloth has been rising this year besides cotton.

Among them, 32X32 grey cloth has increased by 32.73% since late February.

This means that without considering the raw materials in advance, if the home textile business's gray cloth accounts for 90% of its operating cost, then the price of the fabric will increase by nearly 30% in the year.

With the increase in cotton prices and other factors, the business cost increase is likely to exceed 30% this year.

Although the market is very optimistic about the home textile industry, such a rise in the upstream price will definitely suppress the gross profit margin and then affect the business performance.

Statistics show that in the first half of this year, the gross profit margin of fuanna sales was 46.41%, up 3.4 percentage points from the end of last year, and the gross profit margin of Meng Jie home textiles was 38.39%, which rose 2.1 percentage points.

The first textile network editor in chief Wang Cheng said that since the main raw material of home textile producers is cotton and cloth, the price increase is the general trend.

This round of cotton prices will definitely suppress the gross profit margin, but if enterprises can pass some of the cost pressure through the increase in price, it will eventually ease the downward pressure on gross margins.

In fact, whether consumers can accept the price increase depends mainly on whether the pace of industrial upgrading is consistent, otherwise, the market share of enterprises that first raise prices will shrink risk.

It is worth noting that the gap between supply and demand of cotton has reached a higher level. The second half is likely to maintain stability over 20 thousand yuan / ton.

As a result, the price increase of home textile producers this year will be a reasonable range of 10%~20%.