Guangdong Foreign Trade Shoe Enterprises Raise Prices And Keep Track Of Profit And Loss Lines

Adidas was flutters this year and recently announced that the first quarter net profit was 32% to 169 million euro, up from the 156 million euro that analysts had expected.

Guo Weiwen, a spokesman for Guangdong Wan Bang shoe company, whose annual production is more than 13 million pairs of shoes produced by Adidas, has recently accepted the first financial daily interview. However, it said that the profits of the company will not increase or decrease this year due to the increase in exchange rate, production costs and other factors.

Guo Weiwen also said that the situation in the industry was fairly good, the orders were very stable, and Adidas had to give them a relatively good profit margin in order to ensure the quality of the products.

Some shoe companies have suffered losses or failed because of poor bargaining power and unbearable cost pressures.

According to statistics from Guangzhou customs, in the 1~2 months of this year, 1512 enterprises in the Pearl River Delta region were exporting footwear, representing a decrease of 1855 over the same period last year.

In the first quarter of this year, Guangdong exported 750 million pairs of shoes, 20.1% lower than the same period last year (the same below), worth 2 billion 320 million US dollars, an increase of 5.4%.

Not only is the export of footwear industry sluggish, but also the export of traditional textile products such as textiles, clothing and toys in Guangdong is not optimistic.

In the first quarter of this year, Guangdong exported 6 billion 930 million US dollars of textile and clothing, a slight increase of 0.5% over the same period last year, of which export clothing and accessories 4 billion 970 million US dollars, down 5.3%; toy exports 1 billion US dollars, an increase of 4.8%, an increase of 24.7 percentage points over the same period last year.

Because of the impact of RMB appreciation, export tax rebate, adjustment of processing trade policy, rising cost of raw materials and labor, and the subprime mortgage crisis in the United States, the export oriented economy is facing unprecedented challenges than major Guangdong.

In the 1~4 month of this year, the total value of Guangdong's import and export trade was US $207 billion 380 million, an increase of 14%, accounting for 26.2% of the total import and export volume of the country.

Although it still holds the throne of the national foreign trade champion, the increase is 10 percentage points lower than the 24.4% increase in the whole country.

Exchange rate nibbling profits "on the one hand, the appreciation of the renminbi continues to rise, on the other hand, domestic production costs continue to rise, business is becoming more and more difficult to do, and now has basically reached the situation of no profit, which is very test of our appreciation of the renminbi's expectations, once the prediction is not allowed, it is likely to cause losses."

Guangdong a large toy business person in charge told reporters.

Guangdong toy exports account for about half of the global toy sales. In the past two or three years, the export cost of toys in the Pearl River Delta has increased by more than 15%.

The person in charge said that although the price has been continuously raised, it is impossible to pfer all the costs to purchasers, so the profit is getting thinner. Now the profit of the whole industry is only about 2% to 3%, and the toy enterprises have entered the stage of shuffling.

Zhou Shijian, executive director of the China International Trade Association, believes that Guangdong has undertaken large-scale manufacturing pfer from Hong Kong, Macao and Taiwan. But over the years, many factories still rely on low price competition to obtain overseas orders, and lack of independent innovation and sales channels.

This year, the situation is grim for Guangdong's foreign trade enterprises.

The gradual appreciation of the renminbi has not had immediate effect at the beginning, but to a certain extent, its lethality broke out, and now it has basically reached the critical line that the labor-intensive industries can bear.

This will trigger a reshuffle of the industry.

Guangdong has already seen some businesses such as clothing, shoes, toys and other labor-intensive industries fail or narrow their production scale.

The era of cost advantage has gone for ever. In this case, it is necessary for enterprises to adjust their own situation.

Many enterprises in Guangdong mainly engage in 100% OEM export. Most of the profits are made by brands and buyers, and the profit of export products is often less than 10%.

Because of the fierce competition in some labor-intensive products with low technology content, the international bargaining power is generally poor, and the negative impact of the accelerated appreciation of RMB on these enterprises is quite large. Floating exchange rate has been eating away their meager profits.

Raising the price and staying at the profit and loss line "the exchange rate is like an irregular bomb. If one year or half a year's order is placed, it's like holding a bomb in your arms. Now we basically don't receive more than three months' orders.

The profit of labor-intensive food processing industry is only about 2% to 3%.

Long Lian Jun, general manager of Henglong long food export Co., Ltd., Zhongshan, Guangdong, said that the use of financial instruments to avoid exchange rate risk is not realistic for enterprises. In recent three years, it mainly relies on its own forecast of the recent exchange rate, avoiding risks by raising prices, and holding 2% to 3% profits.

Zhong Haosen, assistant general manager of Guangdong textiles import and export Limited by Share Ltd, also said that only two or three months' short term orders are currently available, and the price is increased by 3% to 5%.

Half a year is a long way to go. Unless the customer is willing to bear the cost of rising due to exchange rate changes, it will at least increase by 10%, which is beyond the magnitude that overseas buyers are willing to bear.

The reporter has learned that raising the price of products is the most popular way for Guangdong enterprises to deal with the appreciation of the renminbi, but it is difficult for them to raise the price for products without their own brands and high technology content.

Enterprises can only improve product quality and added value continuously, and then adjust product price gradually according to the change of exchange rate.

However, for those purely engaged in processing trade, it is not always possible to pass the increase on the price to overseas buyers.

Guo Weiwen said, although Adidas is constantly adjusting the price of orders, but the price increases can not keep up with the cost rise. Some of the increased cost still needs to be digested by the processing plant itself.

Wan Bang shoe production line was originally set up in Baiyun District of Guangzhou. In the past one or two years, it has been pferred to Qingyuan, Guangdong, to reduce costs.

In addition, Wan Bang is also expanding the production of domestic products. This business is growing rapidly, and now it accounts for nearly 30% of the total output.

Since its accession to the WTO, Guangdong's foreign trade has maintained a rapid growth of over 20% for many years.

Guangdong's foreign trade target is expected to grow by only 10% this year.

Liang Yaowen, director of the Guangdong Provincial Department of foreign trade and economic cooperation, put forward the work of the foreign trade and Economic Cooperation Conference in 2008. One of the priorities of this year's work is to promote the pformation of foreign trade from quantity increase to quality improvement, and expand the export of high technology content, independent intellectual property rights and independent brand products, improve the grade and added value of labor-intensive products, continue to follow the implementation of the adjustment of processing trade policy, and push the processing trade enterprises to expand the gradient pfer of domestic sales and processing trade.