Jingyuan International Announced That It Will Increase The Capacity Of Vietnam Base, And Will Be Built Overseas After UNIQLO, H&M And GAP.

In June 12th, Jingyuan International announced that it had completed its review of its multinational production platform and decided to speed up the pace of redistributing its capacity from China to non China production base.

According to the redistribution scheme, Jingyuan international plans to increase its capacity in non China production bases, especially Vietnam, because the local continues to benefit from the membership of the p Pacific Partnership comprehensive progress agreement (which came into force in January 2019).

In addition, the group plans to continue to reduce its capacity in China, which is expected to result in a one-time cost of about $14 million in the first half of 2019.

Since the production base of the group's jeans section is concentrated in China, the division will be affected most.

Following the redistribution plan, it is expected that the group's revenue from the Chinese production base to the US market will be reduced from about 14% in 2018 to nearly 6% in the second half of 2019.

Jingyuan international will continue to closely monitor the developments. However, it is expected that the related facilities and other costs arising from the redistribution of production from the mature production bases to the newly established production units outside China will have a negative impact on gross margin and net interest rate in 2019.

Zhang Yidong, vice president of Societe Generale Securities economics and Finance Research Institute, said before that textile and garment manufacturing industry is not only a labor-intensive industry, but also a cost sensitive industry. In recent years, due to low labor costs, convenience of raw materials and preferential trade policies and other factors, the industry has shifted in Asia, and brand clothing companies have gradually shifted their manufacturing orders to new Asian garment manufacturing centers, namely Vietnam, Kampuchea and Bangladesh.

This has prompted China's textile and garment manufacturing industry to continuously carry out industry integration, and at the same time, it also urges enterprises to continuously adjust their structures to cope with industrial upgrading.

Zhang Yidong said that in recent years, the economic development of Asian countries represented by Vietnam, Bangladesh and Kampuchea is relatively stable, providing a favorable environment for garment manufacturers to pfer production bases.

First of all, Vietnam has become a strategic base for garment manufacturers.

Over the past few years, the gross domestic product of Vietnam has seen a steady growth in median digits.

Secondly, according to the share of global garment exports, the second largest producer of fiber in Bangladesh is second only to China, mainly due to cheap and sufficient labour force, as well as banner policy and preferential trade agreement.

In the 2013-2017 year, the actual GDP in Bangladesh increased by 6% every time.

In addition, garment factories in Kampuchea are engaged in processing activities and rely on cloth and accessories imported from other countries.

In the 2012-2015 year, the CAGR of GDP in Kampuchea was 9%.

Compared with developed countries, China's labor costs are relatively low.

But comparing the labor cost of garment manufacturing in China and East Asia and Southeast Asia, it can be found that the average staff cost per garment in China in 2014-2017 years is 2 times that of East Asian and Southeast Asian countries.

Relatively cheap labor costs provide favorable conditions for developing garment manufacturing in East Asian and Southeast Asian countries.

Jingyuan international began to build factories overseas in the 70-80 's in the twentieth Century, which has the first mover advantage in the industry.

At the same time, combined with the company's many years of experience in international trade operation, the company put into operation in overseas factories faster.

In addition, multinational manufacturing platforms can combine advantages of different manufacturing sites, such as lower import tariffs, international trade policy interests, lower manufacturing costs, strong local strength, and supporting customers in their related market expansion activities and different growth strategies.

As of mid 2017, the company has more than 20 direct production bases in 5 countries.

Among them, China is the most mature manufacturing country of Jingyuan international, followed by Vietnam.

Jingyuan international is expanding its production facilities worldwide to ensure internal and integrated growth.

The company continues to expand to Southeast Asia and East Asian countries, among which the key expansion plan includes further expansion of manufacturing capacity in Vietnam and Bangladesh.

In addition, the company intends to expand production facilities in Yunnan and Bangladesh by 2019, with an annual capacity of 130 million and 27 million units to meet the growing demand of customers.

In addition, from the analysis of exchange rate changes, Zhang Yi Dong judged that because of the diversified production and operation strategy of Jingyuan international, East Asian and Southeast Asian businesses accounted for more than 60% of the total revenue, and most of the trading currencies were US dollars, Hong Kong dollars and Renminbi.

In addition, the company's operating expenses are traded in US dollars, Hong Kong dollars, Renminbi, Dong Dong and other local currencies.

Foreign exchange fluctuations will have a certain impact on the company's business performance.

In its 2017 annual report, Jingyuan international disclosed that the company has built new production facilities in Vietnam and Bangladesh, and is expected to be put into operation in 2018 and 2019. This will further enrich the multinational manufacturing platform and its advantages to reduce costs.

Reporters learned that Jingyuan international was founded in 1970, mainly engaged in the manufacture and sale of clothing, through the "co create" mode to provide customers with product design, development, procurement of raw materials, industrial process innovation, production, optimization of production costs, inventory management and delivery services, the main customers are mainly UNIQLO, HM, Levi 's, TheNorthFace and UnderArmour and other clothing brands.

It was listed on the HKEx in November 2017.

At present, the company delivers about 350 million garments annually.

Jingyuan international was listed on the main board of Hongkong stock exchange in November 3, 2017.

Through nearly 50 years of development, the company has become a leading enterprise in the garment manufacturing industry.

According to the financial report, as of the end of December 31, 2018, Jingyuan international realized $2 billion 496 million in revenue, an increase of 14.6% over the same period last year, a gross profit of 470 million US dollars, an increase of 6.17% over the same period last year, a net profit of 149 million US dollars, an increase of 0.5% over the previous year, a basic earnings per share of 5.24 cents, and a final dividend of 8.4 cents per share.

Jingyuan International said that the increase in casual wear revenue was attributable to the growth of key customer demand.

Jeans gain benefits from the integration of key suppliers' supply chain.

Even with the shortage of skilled labour in China, the growth of underwear is at an acceptable level.

The increase in sweater revenue is mainly due to the deliberate search for a large number of off-season orders to make full use of off-season production capacity.

The growth of sportswear and outdoor clothing is mainly driven by capacity constraints and our strategy to reduce non core customers.

As of 2016, Jingyuan international service operated more than 55 brands of more than 30 customers, and seven of the ten leading global brand apparel companies were their long-term core customers. As of 2014, 2015 and 2016, the sales of largest customers to Jingyuan international accounted for 33%, 34.1% and 36.2% of revenue respectively, while sales of five major customers accounted for 72.5%, 70.3% and 69.7% of operating income respectively.

Casual wear: Fast Retailing (UNIQLO, GU), H&M, Marks & Spencer, Abercrombie & Fitch and Gap;

Jeans: Gap, Levi 's, Target, Abercrombie & Fitch, VF (Lee) and H&M;

Underwear: L Brands (Victoria 's Secret, PINK), Marks & Spencer, Fast Retailing (UNIQLO, Retailing) and X;

Sweater: Fast Retailing (UNIQLO, GU), Marks & Spencer, Gap and Abercrombie & Fitch;

Sportswear and outdoor wear: Under Armour, VF (The North Face) and Puma.