Textile Enterprises "Toddler" To Participate In Cotton Futures Hedging To Find Breakthroughs

In June, Huafu color spinning, a leading listed company in the colored spinning industry, issued a notice that it intended to use the margin limit of not more than 80 million yuan to carry out futures hedging.

Futures analysts said that although the company as a leader in the color spinning industry, has a strong bargaining power, and colored spinning is also a sunrise industry in the textile industry, but the sharp fluctuations in raw material prices also have a great impact on its production and operation.

Huafu color spinning belongs to the middle reaches of the cotton production chain. Therefore, its risk exposure is both ends, and it can be based on the fluctuation of cotton price to buy and sell hedging in two ways to avoid risks.

Some analysts pointed out that although the enterprises will refer to Zheng cotton price at present, they are still immature in terms of operation level. Many enterprises have not set up their own concept and team, and even the domestic textile enterprises "have no real guarantee".

Cotton prices fluctuate sharply and enterprises seek help from futures.

Perhaps it is a common saying that "good three years, bad three years, bad and bad three years," textile enterprises are receiving risk education in the huge fluctuation of raw material prices.

From the beginning of November last year, the price of cotton reached 34250 yuan / ton, and cotton prices began to decline continuously. They fell to 25000 yuan per ton in November 24th last year and fell to 25810 yuan / ton in January 18th this year, and then rebounded to 30610 yuan / ton, but then it was down and down 25000 yuan / ton. It fell to 24465 yuan / ton in March 16th this year, and fell to 22405 yuan / ton in May 6th this year. At present, the price of Zheng cotton is less than 24000 yuan, and it is suppressed under the 20 day average, the price is about 23800 yuan / ton.

At the beginning of this month, the listed company Huafu color spinning announced that according to the market and company's operating conditions, the maximum margin of the futures hedging paction in 2011 is not more than 80 million yuan.

The company said that in recent two years, cotton prices fluctuated fiercely and frequently, and the company's participation in futures trading combined with spot market pactions could effectively widen the procurement channels, help companies avoid the risk of large fluctuations in cotton prices, and maintain sustained and stable business returns.

As a leading enterprise of color spinning, Huafu color spinning last year and this year's quarterly report are beautiful.

In the first quarter of this year, the income of Huafu color spinning was 1 billion 413 million yuan, and net profit was 98 million 840 thousand yuan, up 61.73% and 33.81% respectively compared with that of the first quarter. EPS in the first quarter was 0.36 yuan.

Earnings growth is still good, but profit growth is slightly slower than expected.

The company's net profit increased by 154% over the same period last year, and its performance exceeded expectations.

Last year, operating income reached 4 billion 783 million yuan, up 45.4% over the same period last year, and the total profit grew by 101%.

Zhou Jianrui, a futures analyst at Huatai the Great Wall, believes that the enterprise is a company that buys cotton yarn and sells yarn links, and is in the middle of the cotton price chain. Therefore, the risk of exposure at both ends is that cotton prices are expected to rise, facing the risk of cost increase; cotton prices are expected to fall, yarn prices will fall and face the risk of sales.

The company also focuses on strengthening cost control. In the analysis report of Shenyang Wanguo Securities, it shows that Huafu color spinning has achieved a 10% reduction in overall cost through the westward shift of the industry. Meanwhile, the use of national auction, import quota increment, seed cotton purchase, futures operation and other ways to lock high-quality resources to avoid the risk of large fluctuations in cotton.

It is understood that, due to the fall in cotton prices, many garment enterprises are on the waiting list. Although the orders for Huafu color spinning are sufficient, the number of orders has declined, and the preferential tax policies have come to an end.

However, analysts in the industry say that the yarn decline is less than that of cotton, and the price of yarn is still relatively strong. Therefore, the two quarter gross profit margin is expected to remain unchanged from the first quarter.

From last year to this year, we passed "ice and fire two days".

Beginning in early June of last year, Zhengzhou cotton futures launched a magnificent bull market situation. It took only a short period of 5 months. Zheng cotton rose from around 16000 yuan to 34250 yuan.

The US cotton rose from 80 cents last June to 219.7 cents, or more than 170%.

Analysts say cotton prices have risen all the way, and the price of yarn has also risen, and the increase is higher than cotton prices.

This brings the textile industry's profit margin to a new high in recent years.

The good days of "relying on heaven" have reached its climax.

Huafu color spinning said, "because of its short industrial chain, the cost pfer capability is strong.

Since 2010, the price of cotton has increased by more than 100%, and the average yarn product has increased by 80%.

With the sharp fall in cotton prices this year, many textile enterprises have been unable to sustain it. It is understood that large fluctuations in commodities have left about 30%-40% of small and medium-sized textile enterprises closed, and some of the stronger enterprises have begun to turn their attention to the use of futures tools to hedge hedging, so as to maintain the stability of production and operation.

Futures analysts said that cotton futures began to sell in 2004 after being listed in China. The highest price was 17000 yuan / ton in early 2008 before July last year.

And domestic textile enterprises in the futures hedging experience is seriously inadequate.

Zhou Jianrui, a futures analyst at Huatai the Great Wall, said that hedging is not to completely digest the risks faced by enterprises, but to hedge the impact of spot price fluctuations on their production through hedging.

For example, the profit of spinning yarn after buying and selling, rather than making money by hoarding cotton or reducing inventory.

Compared with the international giants, the domestic enterprises are very immature in terms of futures hedging.

It is reported that the supply of Louis Da Fu, the world's third largest food exporter, is relatively stable because of its mature operation in the futures market.

Some business executives said that the importance of futures could be felt from the situation of international enterprises' hedging, and India enterprises who were not used to making futures often had problems.

However, Zhou Jianrui believes that after all, the domestic futures market has just started, and the development space is large. The participation of enterprises is in line with the needs of market development, and is helpful for business planning.

Moreover, enterprises participate in the futures market, grasp and understand the price fluctuation of cotton timely, and hedge the risk of price fluctuation reasonably at the right opportunity.

Yu Lijuan, an analyst at Jinshi futures, thinks that the advantages and disadvantages of corporate hedging should be combined with the spot market. Generally speaking, there are three situations: the first is to maintain full value, that is, the price range of futures market and spot market are the same, and the enterprise has reached the spot purchase price previously formulated.

Secondly, it is not completely hedging, and the price range of futures market is smaller than that of the spot market. The enterprises only reach the effect of partial value preservation, which is higher than the previous spot purchase price, but it is far better than not taking part in hedging.

The best case is that there is surplus after full value preservation, which is what futures most expect, that is, the price fluctuation range in the futures market is larger than that in the spot market price, and the final purchase price of the enterprise is lower than the previous spot purchase price.

Careful decision should be made when participating in hedging.

According to the announcement of Huafu color spinning, the company's hedging futures are cotton contracts on the New York Futures Exchange (NYBOT) and Zhengzhou commodity futures exchange, and the deposit will be no more than 80 million yuan in the future.

Jinshi futures analyst Yu Lijuan said that the company is in the middle reaches of the cotton industry chain, and its business is mainly yarn production, and its raw materials, that is, upstream is cotton.

It has not been heard that the company has participated in hedging.

It is understood that Huafu color spinning this year to cotton prices are more cautious judgement, raw materials procurement is only used to maintain a reasonable turnover, raw material inventory is not high.

According to the company's hedging funds and the issued warranty notice, a rough analysis of the company's participation in hedging is aimed at widening the procurement channels and avoiding the risk of large fluctuations in cotton prices.

According to the actual situation of the current spot market, downstream textile and clothing consumption is not strong, yarn inventory is overloaded. Later, the concern of the enterprise is nothing more than the effective digestion of yarn inventory, and the shortage of cotton resources in the new and old year, and enterprises are facing difficulties in procurement and high cotton prices.

In view of this worry, we can take part in the hedging business of forward contracts.

The industry suggested that, in terms of capital allocation, in accordance with the reserve of 30% of the funds to circumvent the risk of additional margin, enterprises in the purchase of hedging when the amount of money to spend up to 60 million yuan is appropriate.

Zhou Jianrui believes that from the perspective of participating in futures, in addition to participating in the corresponding hedging according to its own spot stock, we should also develop hedging schemes from the market trend, enterprise intention and market environment.

He believes that in the current environment, if the monetary policy in the second half of the year is expected to tighten, the spot sale is difficult, and the domestic textile industry is faced with a pformation. If the textile export tax rebate is implemented, then the market should still fall mainly, and the corresponding selling hedging can be made according to the spot stock.

If the market chooses to be consolidated, then the enterprise is not necessary to participate in the futures market.

In addition, Zhou Jianrui also said that the current NYBOT cotton trading still has the global pricing power. Huafu color spinning is right and reasonable to participate in the market paction. General large enterprises will cooperate with each other at home and abroad.

He said that if the cotton needed for the spinning of the enterprise was imported from abroad, the cotton price would be faced with the opportunity and risk of the rise and fall after the goods were not delivered to the country after the spot price. If the domestic trading strategy is not appropriate and the domestic position is temporarily unable to handle the warehouse position, the lock can be locked through the NYBOT market in the case of capital permissible, thereby reducing the risk.

At the same time, enterprises do not exclude arbitrage pactions through two markets.

According to analysts, Huafu color spinning is also an important partner of US cotton. Therefore, it is not surprising to participate in NYBOT cotton futures hedging.