Cotton Price Shocks &Nbsp; Bitter Days Of Huafang Textile

After a round of cotton price "roller coaster", the Huafang textile Limited by Share Ltd (600273.SH, hereinafter referred to as "Huafang textile") suffered huge losses in the first half of the year, and its performance was very ugly.

The company lost 31 million 160 thousand yuan in the first half of the year.

Operating income of 717 million yuan, a decrease of 21.04% over the same period last year.

The total inventory has reached 7 hundred million.

However, this is not a difficult problem for Huafang textile enterprise, but a predicament faced by an industrial chain.

Yin Guangyu, general manager of Shandong Wucheng cotton and hemp Group Corporation, told the newspaper that the cotton spinning enterprises had a bad time.

When cotton is at a high price, almost every enterprise has bought a lot of cotton there, which has been stored for at least 1-2 months, and some even more.

Cotton prices fell down during this period of time, and have just recovered.

In this case, large enterprises can still be strong, and small businesses can not sustain themselves.

High priced stock

Yang Shouqiang, a cotton farmer in Xiajin County, has 15 acres of land, but he only planted half this year and the other half rented out.

Yang Shouqiang is worried that the risk of planting cotton this year is quite great.

Now many

Yang Shouqiang hopes that the purchase price of seed cotton will meet the government's protection price of 4.5 yuan per Jin, and he is satisfied.

But it's less than 4 yuan a kilo at the moment.

Yang Shouqiang said, now cotton farmers in the hands of cotton, at least 3 yuan per catty sold.

Yang Shouqiang and his fellow townsman in Xiajin usually send harvested seed cotton to cotton processing plants around Xiajin county.

These cotton processing plants produce enough lint, which will be delivered to the largest cotton in the area.

However, Huafang textile did not purchase cotton farmers' cotton for a long time, because their stock was enough for some time.

These cotton were bought by them when cotton prices were high.

After the acquisition, we will have to wait for the new cotton market this year.

But it is said that the new cotton market will be delayed for half a month due to the reason of rain.

Huafang textile semi annual report shows that the inventory of the entire company has more than 700 million yuan.

It includes 174 million yuan of raw materials, 64 million 800 thousand yuan in products and 522 million yuan in inventory.

Many cotton mills around the world have no intention to purchase cotton and lint as almost every company has a lot of high priced stocks.

Unless cotton farmers lower prices, cotton spinning enterprises may be able to buy some.

Huafang textile Xiajin Industrial Park responsible person said that the new cotton market in September, the state for cotton purchase and storage price of three cotton fixed at 19800 yuan / ton.

This means that the higher grade cotton will break through 20 thousand yuan per ton, while the worse grade will be less than 18000 yuan per ton.

The above responsible person said that many cotton spinning enterprises, after new cotton was listed last year, are all selling up when prices go up.

So when cotton prices reached 34000 yuan per ton last year, cotton processing and textile enterprises bought and hoarded cotton, resulting in a lot of high priced stocks.

Huafang textile said that the company is facing "high price inventory, low price products" situation.

In the first half of this year, especially in the second quarter, Huafang textile was affected by the drop in cotton prices.

The cost of cotton and cotton yarn is higher, the profit space is greatly reduced and the gross profit margin of products is reduced.

The sharp rise and fall of cotton prices makes the cost fluctuation very serious.

This situation has seriously affected the overall profitability of enterprises.

At the same time, "labor shortage" has also made enterprises worse.

Huafang textile Securities Department staff told this newspaper that the wages of workers have now reached an average of about 2000 yuan, the difficulty of financing is also increasing, and new loans are no longer available.

The recent decline in cotton orders has become increasingly evident, which has made businesses miserable.

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Industry shock

The relevant person in charge of Huafang textile Xiajin Industrial Park said that the small and medium sized cotton spinning enterprises were about 50% dead under the impact of this round of market.

The production of Huafang textile Xiajin Industrial Park has decreased by about 50%-70% this year.

The responsible person said that the key to the market of cotton spinning industry is the international and domestic macro situation.

This year's economic situation is more impressive than the financial crisis in 2008.

Huafang textile said that the cotton textile industry was affected by the two domestic and international market shocks, especially by the fluctuation of the price of textile raw materials.

In the first half of 2011, the company achieved a total revenue of 716 million yuan, down 21.04% from the same period last year, and the total operating cost was 773 million yuan, with a net profit of -3116 million yuan.

Known as the industry weathervane, China's largest cotton textile enterprise Wei Qiao textile [3.99 -3.62%] Limited by Share Ltd (02698.HK, hereinafter referred to as "Wei Qiao textile") also failed to avoid the volatility of the cotton spinning industry to the enterprise.

The company's income fell 3.3% in the first half of this year to 8 billion 31 million yuan, and the gross profit dropped 2.2% to 1 billion 17 million yuan compared to the same period last year.

In mainland China and Hongkong, revenues fell by 2.7% and 27.9% respectively.

002083.SZ, the "-0.49% shares of the [8.08", has escaped the disaster.

Their operating income and net profit in the first half of this year increased by two digits.

Peng Shiqiang, a staff member of the Securities Department of Fu Tian, told this newspaper that as a downstream company, the company did not specialize in downstream products such as home textiles, and these years they stretched the industry chain very long.

The company is doing everything except cotton.

In this way, the cost of the intermediate process will be digested by the enterprise itself, and the profits in the middle will not be eaten by others, so it will be better than those who specialize in downstream products.

Huafang textile Securities Department staff told this newspaper that Huafang textile will focus more on textile industry.

It consumes the existing raw material cost and burden at the fastest speed, and grabs the market share in the domestic and foreign markets.

At the same time, we should broaden the financing channels and ensure the diversity of sources of funds.

Huafang textile is also considering pformation.

Conform to the general trend of the pition from the national textile industry to the high-end industry.

But the company has no definite direction.

What we need to do now is to integrate existing businesses and make profits and losses as soon as possible through stable production and operation.