Chinese Flax CFO Qi Shaofeng: Aiming At Integration Of Industrial Chain

Recently, high temperature and cool linen garments have become the new favorite of the people.

The first linen production enterprise in New China was born.

Moist market segments

In 1982, Lanxi flax Co., Ltd. was founded. It is also the second linen manufacturer in China, that is, the predecessor of Chinese flax.

In 2002, China's flax was reformed, and it was completely completed in 2007. In 2008, it was backdoor listed and landed on OTCBB.

Since the beginning of this year, China has introduced a number of strategic investors to China's Flax and plans to land at the US stock exchange.

Shao Feng, who has rich experience in capital operation at home and abroad, summed up the advantages of Chinese flax with "market segmentation".

Although the linen industry accounts for no more than 5% of the global textile industry market, its potential development is very good.

In Europe, for example, the upper class clothing materials are mainly flax except silk.

The biggest feature of flax is comfort, breathability, beautiful appearance, natural ventilation, hygroscopicity, refreshing and sweating. It is known as "natural air-conditioner", and is also the embodiment of identity and wealth.

With the rise of GDP and per capita income in China, the proportion of linen products in home textile industry is getting higher and higher, and its value is also rising.

For example, the price of a traditional suit is usually two hundred or three hundred dollars, and the price of linen blended suit can reach US $3000.

Based on this market positioning, China's Linen focuses on attracting high-end customers.

At present, 60% products are exported to foreign countries, and 40% of them are sold in China.

"China's affluent group is much larger than Europe. In the next 5 to 10 years, the sale of Chinese flax will shift to the domestic market, and the market share will be 50% abroad and 50% in China.

The industry is facing significant opportunities for development.

Qi Shaofeng said optimistically.

At present, more than 90% of the world's flax production and processing bases are in China.

Although France and Belgium are traditional textile giants, their production capacity is shrinking, labor costs are rising, and China's Linen industry is 50% lower than the international competitors' production costs, close to low cost flax resources and low cost labor.

This means that the intermediate processing links in Europe are gradually shrinking and shifting to China.

In terms of the linen market, European demand is the largest, and 60% of the domestic linen cloth is exported to Europe and the United States.

However, although China is the largest textile base and linen production base, the market is more of semi-finished products, and the big head of the profit of the industrial chain is not made by Chinese enterprises.

"What Chinese flax should do now is to link up the upper and lower reaches of the linen industry.

Upstream is raw material for flax.

There are basically three major industrial bases for raw materials. The first is France, with the best linen producing area in Normandy. Its quality and quality are the best.

The second largest base is Egypt, but because of the hot climate, the flax fiber is relatively short.

As a good blend, pure linen production is not ideal.

The third one is China. China mainly has high linen production bases along Xinjiang, Inner Mongolia and Heilongjiang.

Downstream is a variety of flax products, mainly reflected in the home textile, the average profit of linen home textiles is more than 50%.

Although only half a year has been added to China's flax, Qi Shaofeng has fully understood the overall trend of linen industry.

Aiming at integration of industry chain

In Qi Shaofeng's view, the traditional view that the textile industry does not make money is not correct. In fact, the linen industry has a very high profit.

China linen, one of China's most experienced linen producers, has a history of over 25 years of flax production, R & D and marketing. It is the top three exporter of linen products, with 8% of China's export market share.

It mainly deals with middle and high end customers, maintaining an annual growth rate of 40% to 50% with a profit margin of 20% to 24%, which is in sharp contrast to the profit margins of traditional textile industry at a rate of several percentage points.

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As for the competition elements of linen industry, Qi Shaofeng believes that the key lies in the technology. The linen industry is very different from the traditional textile industry. It needs special technology, high technology talents and management talents, and the market cultivation takes 35 years or even longer.

Chinese flax customers basically have more than five years of business dealings, very stable.

Qi Shaofeng emphasized that the customer relationship in this industry is more subtle and needs to enter slowly.

For example, the requirements of European home textile industry are very high. If we want to find a long-term stable tourist source, we need to be nurtured as its supplier and seller, and build products according to its requirements.

Therefore, the entry of this industry is very difficult.

China's Flax began to pform in 2002, and its scale and brand were not ideal. The process of breaking through overseas markets was very long. On the one hand, through the middlemen and on the other hand, they actively participated in the annual flax products exhibition held in Hongkong, Singapore and other places. After taking the product samples, the industry experts assessed and approved the technology and tried to place orders. The initial volume was very small, with only a few tens of thousands of orders, slowly reaching 1 million dollars, and then signed a strategic cooperation agreement, becoming a long-term stable supplier.

In order to enhance the competitiveness of Chinese flax, Qi Shao Feng adopted a positive cost control strategy.

Through technical pformation and technological pformation, the cost of Chinese flax is 10% lower than that of the same industry.

"Some investment banks are curious why the traditional textile industry has only 5% to 10% profit, and the linen industry can reach 20%? The most important factor in this is the supervision, pformation and upgrading of the process.

Followed by cash flow, traditional industries may perform well in the profit statement, but capital turnover is relatively slow.

The cash flow of Chinese flax is faster.

Because we are high-end customers, the general credibility is very good, and cooperative customers do not need to do mortgage, credit is used to guarantee, do not take account of accounts receivable.

At present, China's flax has not yet fully integrated the industrial chain, and has not yet fully entered the downstream, and the profit space needs to grow.

Because the production base of linen is in the northeast area, the production of linen is mostly in the area of Jiangsu and Zhejiang, so most of them are small workshops. After the market is being subdivided more and more, the space for acquisition and integration is very large.

"China linen is starting to buy a linen semi bleaching plant in Lanxi, and its capacity will expand by 50% after the merger.

In the future, we will extend the industrial chain, complete the project of yarn dyed fabric production within one year, and buy spinning factories within two years to further expand our capacity.

After that, it bought home textile and garment production plants, and established home textile and clothing chain stores.

Basically, we will complete the industrial chain of weaving, spinning, bleaching, dyed weaving, home textiles, clothing and chain operation in three years. "

Qi Shaofeng said with confidence.

Transfer board

The ambitious development strategy is inseparable from capital push.

After joining the Chinese flax at the beginning of this year, Qi Shaofeng was mainly responsible for listing, including introducing strategic investors, standardizing the internal control system, and re establishing the financial platform.

Due to the lack of understanding of overseas capital markets, China's flax has gone through many detours in the past few years, and spent two to thirty million to buy a OTCCB shell, but it has not entered its door, and its underestimation is only 4~5 times.

After Qi Shaofeng took over, he quickly implemented the active communication between lawyers and accounting firms and investment banks, and chairman and CEO Gao Ling, in order to confirm the listing plan.

At the same time, Qi Shaofeng deployed a group of middle-level cadres with good English management and experience in the company to form a listing team. In accordance with the requirements of the US listed companies, the internal processes were restructured, and a professional PR company was hired in the United States to repackage the company and actively participate in the capital association and some roadshows.

"This year, the company first completed the pfer board, believing that investors will see our good market performance in the second half of this year."

At present, more than 10 overseas institutional investors have expressed great interest in Chinese flax, including research, visit and visit to the company.

"We would prefer to have some larger, more robust long-term investors coming in.

At present, the company's financial structure is very stable, debt to equity ratio of 65%, basically a highly efficient debt structure.

Now the profit growth trend of Chinese flax EPS is particularly good. In 2008, earnings per share were $0.15, and increased to $0.3 per share in 2009. This year's conservative view is $0.4 per share, and at least 0.5 dollars to 0.6 dollars per year.

Qi Shaofeng believes that under the great push of the capital market, the speed of the integration of Chinese flax on the industrial chain will be greatly enhanced.