The Textile Industry For UNIQLO OEM Is At Least 4 Hundred Million Loss Due To The 3 Week Shutdown Of The Epidemic.

The local knitting giant, mutual Textiles Holdings Limited (hereinafter referred to as "mutual textiles") announced today (February 26th) that after the restoration of the Guangdong Panyu plant in February 12th, workers gradually returned to their original jobs. As the number of workers resumed, the production level of the Panyu plant has increased from 40% of its original production level (up to February 14th) to over 80% of its original production level (up to February 25th).


Mutual textiles said that the short cut production and production gap lasting 3 weeks before the resumption of production had a temporary impact on the overall production level of the company. After preliminary assessment, the estimated sales revenue will be reduced by about 400 million to HK $450 million compared with the original production plan before the Lunar New Year holiday.


Zhu Xiaoying, an analyst with Jiayin international, said that in 2020, before and after the Spring Festival, the production slowed down and the supply of raw materials had become a potential challenge for the textile industry. With some exceptions, China's factories are allowed to resume operations in February 10th, provided that factories have taken preventive measures and adopted epidemic prevention facilities and quarantine areas.


First textile network reporter noted that the survey of the channel from Jian Yin International showed that workers were not yet able to return to work due to quarantine restrictions or traffic restrictions, and the initial rate of 20-40% for textile workers was at least. The result is that it may take some time to fully recover the capacity, and the precautionary measures may also involve additional operating costs.


Zhu Xiaoying believes that up to now, the supply chain is the main challenge in the short term, and the long-term supply of raw materials is not ideal and logistics and transportation disruptions will soon lead to the shortage of textile companies in the middle reaches. Now some of the major textile suppliers in China are seeing a marked decline in output in a factory in Panyu, Guangdong. This disruption will lead to delays in product delivery in February 2020 and March.


In Zhu Xiaoying's view, China is the driving force for most of the global textile and clothing retail brands. So it is not surprising that retail giants such as Nike, Adidas and UNIQLO announced that the temporary closure of retail outlets in China due to the outbreak of the epidemic. Coupled with weak consumer sentiment, this may seriously affect China's retail sales. It is expected that the brand retail companies will have sufficient inventory in the next three to six months, and it can be expected that the reduction or cancellation of orders will result in the failure of the textile companies to fulfill their orders, especially because of the disruption of transport or capacity. In addition, the delays in the issuance of new orders due to excessive inventory problems will have a negative impact on the finance of the textile companies.


Public information shows that mutual textile is a local high-end knitting giant. Besides building factories in the mainland, it also builds factories in Southeast Asia, including Sri Lanka and Bangladesh.


First textile network reporter learned that the Vietnam Textile Vietnam factory was put into operation in September 2015, mainly serving the company's largest customer, UNIQLO. According to the 80000 pounds / day capacity in April 2016, Vietnam accounted for 12% of the total capacity. Before Vietnam's factory was shut down, its output was 60000 to 70000 pounds per day, and its capacity utilization was 80%.


However, due to the impact of warm winter, too much inventory resulted in fewer orders from UNIQLO than expected. In the first half of 2019, mutual textiles achieved operating income of HK $3 billion 25 million, a decrease of 11.1% over the same period last year. Gross profit was HK $540 million, a year-on-year decrease of 14.36%. The profit attributable to the company's equity holders was HK $412 million, a decrease of 17.9% over the same period last year.


JP Morgan has published a research report, due to the Uniqlo in 2019 caused by warm winter, resulting in too much inventory, resulting in fewer orders than expected, and forecast sales and net profit in 2019 will decline by 2% and 4% respectively. JP Morgan estimates that the warm winter of 2019 will keep sales weak and cautious about the conservative production expansion of Pacific textiles. Therefore, net profit forecasts for the 2020 and 2021 fiscal years will be reduced by 8% and 10% respectively.


According to the financial report, as of the first half of 2019, mutual textiles achieved operating income of HK $3 billion 25 million, a decrease of 11.1% over the same period last year. Gross profit was HK $540 million, a year-on-year decrease of 14.36%. The profit attributable to the company's equity holders was HK $412 million, a decrease of 17.9% over the same period last year.