Tianhong Textile Performance Conference Vertical Integration To Raise Gross Margin

Tianhong textile (02678-HK) held a performance press conference in March 7th. In 2018, the company's revenue reached a record high of 19 billion 160 million yuan (the same below), an increase of 17.5% over the same period last year, and gross profit margin rose 1.4 percentage points to 16.4%, and the profit attributable to shareholders increased by 1% to 1 billion 163 million yuan over the same period last year.

Xu Zihui, executive director of the group, added: after deducting the one-time accounting gains generated by the acquisition companies in 2017, the actual profit attributable to the shareholders in 2018 increased by 19.4% compared to the same period last year, which is so beautiful in the context of Sino US friction that it is so closely related to the globalization and vertical industry chain of the enterprises.

At present, rainbow has established production lines in China, Vietnam, Kampuchea and Nicaragua.

China had 2 million 120 thousand spindles in 2018, an increase of 19.1% over the same period last year, and 941 looms and knitting machines and 7 jeans production lines. Vietnam has 1 million 380 thousand spindles in 2018, an increase of 10.4% over the same period last year, 448 looms and knitting machines, 14 jeans production lines, and 2 dyeing and finishing lines.

Kampuchea has 9 jeans production lines, and Nicaragua has 1 dyeing and finishing lines.

In 2018, the company set up a joint venture with Hongkong global textile dyeing and dyeing enterprise, a leading company in the world, which will further enhance vertical integration within the company and increase the gross profit margin of high value-added fabrics.

Mr. Hong Tianzhu, the chairman of the group and Mr. Xu Zihui, executive director, answered the specific questions of reporters on the spot Q & a content of more dry goods.

Q: will the pfer of production base from China to abroad in the future?

And views on the future Vietnamese market.

A: (Hong Tianzhu) in fact, in the course of historical development, China's capacity has never been pferred.

Although the cost of China is higher than that of foreign countries, it has a more complete industrial chain and more skilled workers.

Because the production efficiency there is low.

In the future, the mainland of China will increase investment, pformation and upgrading, and overseas market will be more large-scale expansion.

Q: how does trade friction affect foreign factory orders?

A: (Hong Tianzhu) the final outcome of Sino US negotiations will not be too bad. The increase in international tariffs is only temporary. The change of exchange rate leading to the change of cost is also an important factor.

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We call the local supply chain, build factories locally and build local bases to achieve rapid response in the local market.

At present, the main markets of the garment industry are China, Japan, the United States and Europe.

If we can build bases in these markets, I will judge the future business will be endless.

In the future, China will certainly be strong in the future, and the currency will be strong. The cost of production bases will certainly not be the same as those countries whose currencies are not strong.

FMCG is sensitive to cost, and international buyers are the main strategy to avoid the risk of supply chain effectively.

China's internal market is growing, the efficiency of industrial intelligence is improving, and its competitiveness in the international market is still the best in the world, because the diversity of the final product will still dominate the market, while some overseas countries are cheap, but the efficiency is still too low.

Q: the financial cost of the company was about 85000000 last year, and this year increased to 5.1 billion. Why?

How to adjust the financial structure in the future?

The company has been doing vertical integration, but has not yet seen the effect. Is the biggest source of the effect in the future coming from the integration of Hongkong's celebration industry?

A:

(Xu Zihui) the appreciation of the renminbi in 2017, we have a foreign exchange earnings hedging financial expenses, in 2018 just the opposite, add up to a great contrast.

Of course, we have invested more money over the past two years.

(Note: Tianhong 2018 increased by about 70 thousand of the loan interest expense in 2017 compared with that in the previous year, and the financing exchange loss increased by about 350 million, and the two additivity was about 430 million).

(source: Tianhong textile 2018 earnings)

Actually, there is no trade friction between China and the United States, and there are trade barriers in the world as well as taxes.

If we build a base in Mexico, we can use the US Mexico trade agreement to avoid it.

Vietnam is also exempt from Japan and Korea.

So whether globalization or Sino US trade friction is bound to go global,

Our cooperation with Qing Ye is more powerful now. It has done very well in the woven fabric plate.

The industry itself is only in China, and the "fit" of Tianhong and Qing industries has become the world's leading manufacturer of woven fabrics.

(Hong Tianzhu) I add that vertical integration is difficult for Tianhong, and the factory that started two or three years is not the best.

Our vertical integration is carried out in three aspects, including knitted fabrics, denim fabrics and garments, and woven fabrics.

Last year, we worked with Qing Ye, which is the best supplier of woven fabric in the world. This is a highlight.

Theoretically, wiring is going to be wiped out in the future.

Through the integration with Qing Ye team, we should sell fabric in the future, and we should not sell any more cloth.

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(in 2018, fabric accounted for 10% of revenue and 4.5% of cloth).

We should sum up the income of the Qing industry team in March.

Q:'s products focus on differentiation and innovation. Will future rainbow increase R & D investment?

Or more acquisitions and cooperation?

A:

(Xu Zihui): in the yarn part, we already have our own development ability. In weaving fabrics, we cooperate with Qing Ye. It has strong R & D and development capabilities. We can get the woven fabric to a high standard immediately through acquisition.

After the celebration, it has been used in fabric production for the time being.

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Later, we will focus our efforts on integrating the business of Qing Ye, practicing internal strength, and raising profit margin is our hope.