The Declining Cotton Textile Industry: The Failure Of Huafang Textile Industry In 6 Years

In October 29th, Hua Fang

600273.SH) issued a special announcement on the fulfilling commitments of Huafang textile company. In January 25, 2007, Huafang group promised that the Xiajin cotton business and assets will be listed as a whole in the next 6 years.

However, this commitment will expire in January 25, 2013. Huafang textile company inquired about its parent company Hua Fang group in the form of inquiry letter, and got the answer that "there is no feasible solution to fulfill the promise".

Huafang group replied, "since 2011, the cotton textile industry has made a difficult progress because of the sharp fluctuations in cotton prices, the rapid growth of costs, the slow recovery of the international market, the cold demand of domestic and foreign textile markets, and the insufficient production power of the enterprises.

Prior to this, Huafang textile had suspended the implementation of the overall listing plan for the two time, and the reply letter of the Huafang group meant that the listing plan for the overall cotton business began 6 years ago.

"At present, we have not yet obtained any news that it is possible to restart the plan in the future."

Huafang textile secretaries Zhao Jiangbo told reporters.

Two suspension

The reorganization of assets is a bad fate.

In 2007, Huafang group was full of confidence and issued a restructuring commitment, which is related to its current performance.

In those days, Huafang textile completed 1 billion 776 million of its operating income, achieving a net profit of 52 million, an increase of 19.46% over the same period last year.

However, it didn't last long. In 2008, Huafang's performance declined. In July 31st of the same year, Huafang textile said it would not implement the overall listing of the cotton textile assets of Huafang group. The reason was focused on the cost of raw materials, manpower costs and order shrinkage.

In those days, Huafang textile realized 1 billion 731 million yuan of revenue, and its net profit attributable to its parent company was 2 million 987 thousand and 700 yuan, down 94.23% from 2007.

Then, in 2009, Huafang textile realized 1 billion 443 million of its operating income and net profit of -3954 million yuan. Its performance has declined sharply from positive to negative.

In 2010, cotton textile enterprises rose again from the bottom of the valley, facing the double factors of market warming and soaring cotton prices.

Cotton prices surged from less than twenty thousand yuan per ton to more than thirty thousand yuan per ton.

Such a price makes a big profit for Hua Fang, who had previously locked in a large number of low-priced cotton.

In March 30, 2011, the 2010 annual report of Huafang textile was released, and a notice on suspension and reorganization was issued.

In 2010, the income of Huafang textile was 2 billion 18 million yuan, an increase of 39.8% over the same period, with a profit of 178 million yuan.

However, on the same day of its 2010 annual report and the reorganization information release, the national development and Reform Commission formally released the plan for temporary storage and storage of cotton in 2011, and the price of standard grade lint to the warehouse was 19800 yuan (weight) per ton.

Subsequently, cotton prices plunged rapidly from the highest historical price of 31550 yuan / ton in March to 19034 yuan / ton in August, down 39.67%.

Huafang textile resumed its business in May 17, 2011, and the restructuring was suspended again.

At that time, Han Yimin, deputy director of Huafang textile, bluntly pointed out that the price of cotton was too low. If the reorganization was made at this time, it would eventually lead to a loss of Huafang.

In fact, "Xiajin assets" has made the current Huafang textile company unable to spare any time.

"Xiajin assets" refers to Huafang Xiajin Textile Co., Ltd., a wholly owned subsidiary of Huafang textile, which was invested in Xiajin, Shandong in August 2003.

At present, it has invested 900 million yuan, producing 60 thousand tons of cotton yarn and 1 billion 200 million yuan in total sales. Its "Huafang" brand cotton yarn is also known as "China famous brand".

By the end of 2011, Xiajin's operating income was 1 billion 159 million, and its net profit was -2.33 billion.

In August 2012, the continuous loss of Huafang textile company increased its capital to Xiajin company by 100 million yuan, and changed its registered capital from 100 million yuan to 200 million yuan.

In this predicament, the injection of cotton spinning companies such as cotton textile company, Jintian textile company and Shihezi textile company will naturally make the listed companies more cumbersome.

Expect property to stop losses

However, the stop of restructuring did not stop Hua Fang from losing.

"This year is still running low, and the whole industry is like this."

"Actually," Zhao Jiangbo said.

The quality of the whole industry depends more on the policies of our country. Our prices are regulated by macro policies.

Foreign cotton prices have been much lower than domestic prices. Cotton textile industry's 70% profit factor depends on the price of cotton, foreign raw materials are low, cotton yarn and other semi-finished goods prices will have a lot of advantages than ours.

For the whole cotton spinning industry, the cotton price in 2010 made most of the enterprises make money, and the enterprises that blindly locked high priced cotton were also few. In 2011, the NDRC received the reserve plan, the cotton price was lowered, and the price of cotton yarn decreased naturally.

"A lot of businesses are making a single loss, because the price of cotton is very high before they arrive."

Zhao Jiangbo said.

And Huafang textile is also one of them, its high priced inventory until mid 2011 can not digest completed.

In 2011, the income of Huafang textile business was about 1 billion 747 million yuan, and its net profit was about -2.95 billion yuan.

Later, Hua Fang also sold one of the two lithium battery companies that had previously invested, and mortgaged five properties, including factories, office buildings and dormitories.

In March 2012, some of its cotton spinning equipment was also purchased by Huafang group, a holding company, with a cost of 19 million 640 thousand yuan.

Huafang declined.

But Zhao Jiangbo said, "this year is better than last year. Last year, cotton spinning enterprises rolled down the hillside, and this year it has been operating at a low level."

In its view, relying on the main industry to reduce losses is still not yet predicted, and does not rely on lithium battery business. At present, there is no intention of making big investments or reinvesting.

The real hope of Huafang textile is a notice from the people's Government of Zhangjiagang city in August.

The notice said that according to the deployment requirements of the Zhangjiagang urban master plan (2011-2030) and the "retreat two to three" policy guidelines, Huafang Group Co., Ltd. and Huafang textile Limited by Share Ltd are located in the land acquisition and storage of the people's South Road and the South Ring Road area of Tong Qiao Town, and will be put into the overall planning for commercial and residential development.

"Currently under way, if

We may lose our profits if we are done. "

Zhao Jiangbo said.