Shenzhou International Employs 18 Thousand Garment Makers In Kampuchea New Plant For Development

Shenzhou International Group Holdings Limited (hereinafter referred to as Shenzhou International) released its annual report in March 23rd on the afternoon of March 23rd. During the reporting period, the company achieved operating income of 22 billion 665 million yuan, an increase of about 8.2% over the same period. Gross profit was about 6 billion 876 million yuan, an increase of 4% over the same period last year. The profit attributable to the parent company's owners was about 5 billion 95 million yuan, an increase of 12.2% compared with the same period last year, with a gross margin of about 30.3%, a decrease of 1.3% over the same period last year, and sales of 22 billion 665 million yuan, an increase of 8.2% over the same period. As of December 31, 2019, there were 85700 workers in Shenzhou International. During the reporting period, the total staff cost accounted for 26.3% of the company's sales.


Shenzhou International explained that the reason for the increase in the reporting period was that the demand for main customers' orders continued to grow ideally. During the year, the scale and productivity of the group's overseas production base were further enhanced. The increase in equity attributable to owners of the parent company was mainly attributable to the increase in retained earnings during the year.


During the reporting period, sales of sports products were about 16 billion 322 million yuan, an increase of about 14.3%, mainly due to the rising demand for sportswear in the Chinese mainland market and the US market. Sales of leisure products increased by about 4.3% to 5 billion 388 million yuan, mainly due to rising demand for casual clothes from the Japanese market. Sales of underwear products were reduced by about 39.5% to 803 million yuan, mainly due to the reduction of underwear procurement demand from the Japanese market.


Up to the end of the reporting period, Shenzhou International sales in the European market amounted to 3 billion 890 million yuan, an increase of 2.5% over the previous year, mainly due to the steady consumption demand for sports apparel in the European market. Sales in the Japanese market amounted to 3 billion 542 million yuan, up 9.5% over the same period last year, mainly due to the increase in demand for casual clothing and sports apparel from the Japanese market, and the sale in the US market. The sales volume reached 3 billion 475 million yuan, an increase of 6.8% over the previous year, mainly due to the increase in demand for sports apparel orders in the US market. Sales in other overseas markets were about 4 billion 614 million yuan, an increase of 6% over the same period last year, mainly due to increased clothing exports to Russia, Canada and Australia; as of the end of the reporting period, Shenzhou International sales increased in the domestic market year-on-year. About 13.2%, of which apparel sales were about 6 billion 909 million yuan, up 13.2% over the same period last year, and the domestic market continued to become the largest single market and fastest growing market in Shenzhou International, especially the consumption demand of sports products increased rapidly.


Facing the slowdown in the growth of global clothing consumption demand, the increasingly complex trade environment and the rising cost of labor costs, the industry is under the dual pressure of insufficient demand and rising costs. Shenzhou International accelerates the expansion and efficiency of overseas bases, and further optimizes the allocation of domestic resources and energy consumption structure at home, and at the same time, the retail business accelerates and shrinks completely. Out.


During the reporting period, Shenzhou International continued to expand the production capacity of overseas production bases, and successfully put into operation in the newly built garment factories in Vietnam. The number of employees has steadily expanded. The new garment factories and Vietnam's fabric factories are located in the same industrial area, which is more conducive to the integration of the industrial chain, and also conducive to the reduction of transportation costs and the improvement of material utilization; a new company in Phnom Penh, Kampuchea. The garment factory was officially opened in the first half of 2019. The project is progressing smoothly and is expected to be completed by the end of 2020. It is expected to start production in stages in 2021.


At the end of 2019, Shenzhou International started a new garment factory in Vietnam and built a special garment production plant for a major customer. The capacity of Vietnam's fabric factory has also been continuously expanded, and its fabric capacity has accounted for more than 45% of Shenzhou's total international capacity. It provides a guarantee for the supply of upstream fabrics for the expansion of overseas garment factories. With the expansion of overseas factories, operation and management are becoming more mature, and production efficiency has been improved significantly, laying a solid foundation for the long-term development of Shenzhou International.


According to public information, Shenzhou International is China's largest vertical integrated garment manufacturing leading enterprise, mainly to provide quality knitwear and clothing for customers by means of subcontracting. The main customers of the company are international famous brand clothing retailers. The top four customers are Nike, Adidas, Uniqlo and Puma respectively. The sales market covers mainland China, the European Union, the United States and Japan.


In terms of capacity, apart from the production base of Ningbo headquarters, there are also Anhui Anqing, Zhejiang Quzhou, overseas Kampuchea, Phnom Penh and Vietnam Hu Zhiming and Xining factories. Export volume ranks first among Chinese garment export enterprises.


From the customer level is more stable, mostly for the industry leader, in the first half of 2019, semi annual report shows. Nike is the largest customer, accounting for 32%; two to four Adidas, UNIQLO and Puma account for 20%, 19% and 11% respectively. Wang Jun, an analyst at Bank of China International Securities, said in 1997, Shenzhou International received 350 thousand orders from Japan's largest leisure brand, UNIQLO. The company seize the opportunity, strictly control the production time, and complete delivery within twenty days. In the same period, the company spent $2 million 800 thousand to purchase advanced production machinery from overseas, and vigorously promote the development of production capacity, laying the foundation for attracting more leading brands of clothing in the future. In 2005, Shenzhou International layout Kampuchea factory sought low tax and cost advantages. In September of the same year, Kampuchea factory officially OEM Nike products. After that, PUMA, ADIDAS, KAPPA and other sports brand leaders also became customers of the company. As these garment giants were born with high market share, Shenzhou international market share increased from 1.7% to 4.2% between 2005 and 2012. It is easy to see that the reason why Shenzhou International can enter the leading international industrial chain lies in the rapid response mechanism and the strategic thinking of constantly seeking scale and cost advantages.


It also has the comprehensive advantage of entering the giant supply chain, and it can build industrial chain relationship with a number of industry giants. Shen Zhou International promotes the reputation and market share. From the perspective of Shenzhou International, the advantage of Shenzhou International access to the leading supply chain lies in the fact that the leading enterprises have their own high market share attributes, which means that the company's orders are adequate and the scale expansion is accelerating. The high demand of the merchants will also promote Shenzhou International to optimize its production capacity and gradually differentiate itself from the non supply chain enterprises in the industry.


Reporters learned that at present, Shenzhou International is planning to moderately expand the fabric production capacity of the domestic production base to replace the current fabric imported from overseas bases, and ultimately achieve the balance between the upstream and downstream production capacity of the production base at home and abroad, which will further shorten the delivery time and reduce the logistics cost. To this end, during the reporting period, Shenzhou International arranged the necessary land for the production of fabric in Ningbo base. Through continuous technological renovation and upgrading of production equipment in recent years, the water and energy consumption level of the domestic base has continued to decline during the year, which has solved the problem of the government's restrictions on environmental emission targets after the increase of fabric production. At present, natural gas has been used as the basic fuel in the domestic base, which has effectively reduced the adverse impact on the atmospheric environment.


According to the financial report, in 2019, the total investment of Shenzhou International in property, plant and equipment and prepaid land lease accounts for about 2 billion 841 million yuan, of which about 37% are used to purchase production equipment, about 49% for construction and purchase of new factory buildings and prepaid land lease payments, while the balance is used to purchase other fixed assets.


As of December 31, 2019, the capital commitments for land use rights, property, plant and equipment contracted by Shenzhou International Purchase amounted to RMB 623 million, which would be mainly allocated by internal resources and bank loans.


In 2019, Shenzhou International built a new garment factory in Phnom Penh, Kampuchea. The company invested about $200 million to build downstream garment manufacturing facilities in Kampuchea (for tailoring, sewing, printing, embroidery, packaging and washing processes). The amount will be used for renting land, building factories and staff quarters, building infrastructure and purchasing machinery and equipment.


Meanwhile, Shenzhou International invested $100 million in Vietnam in late 2019 to build a garment production facility.


Lv Ming, an analyst with open source securities, thinks that Shenzhou International started its expansion of overseas capacity earlier than other textile enterprises in China: in June 2005, Kampuchea's first factory, Shenzhou International Garment, was established in June 2005. In 2012, second garment factories in Kampuchea were established -- Tai Wan spinning, and Vietnam's first factory, Delhi fabric, in June 2013. The factory's supporting fabric factory, established in September 2014, Vietnam's WorldCom garment factory, set up third factories in Kampuchea in June 2018 (NIKE special factory) - Rong de clothing, and Vietnam garment factory - dresley garment, February 2019 set up fourth factories in Kampuchea - Yue Group clothing, October 2019 set up Vietnam third garment factories (Adidas special factory).


By the end of 2019, Shenzhou International upstream fabric production capacity accounted for about 42% of total fabric production, and downstream garment production capacity accounted for about 30% of the total garment production capacity. With the gradual commissioning of three new factories in Vietnam and Kampuchea, the proportion of Shenzhou International Overseas capacity is expected to increase further.


Shenzhou International also said that the new crown epidemic had a great impact on the supply chain of the global textile and garment industry. After the Spring Festival, Chinese mainland enterprises generally experienced delays in starting work and low turnover rates in the early days of reemployment, which resulted in some enterprises' delay in delivery of some orders. Some garment producing countries such as Southeast Asia and Bangladesh are also affected by inadequate supply of raw materials such as China's accessories, due to incomplete matching of their industrial chains. Some foreign investment enterprises affect the normal operation of enterprises due to the limited entry of personnel.


The clothing industry generally employs more workers to increase the extra cost to prevent the spread of the epidemic. The decline in consumption demand caused by the epidemic may also bring about insufficient utilization of the capacity of the textile and garment industry. Affected by the continuing outbreak of the new crown epidemic in Europe and the United States, sales of the global garment retail industry have generally declined. Shenzhou International also noted that some core customers of the company have been closed down in some countries' offline stores, while the epidemic situation in the countries concerned is not yet clear. The impact of the epidemic on the revenue of the company's customers is hard to assess. At present, the capacity utilization rate of Shenzhou International has not been seriously affected, and the impact of the epidemic on customers may also be transmitted to the company. If the epidemic situation is not improved, the capacity of the company may be underutilized in the next period.


Fan Zhangxiang, a researcher at Tianfeng securities, thinks that in 2019, the construction capacity of Shen Zhou's new capacity is in 2020, and that the productivity climbing efficiency will be increased in 2020. In terms of fabric production capacity, the production capacity of the domestic and Vietnamese production areas is 55% and 45% respectively, and the future capacity is expected to expand to 350 tons / day, accounting for 50%. In terms of garment production capacity, domestic capacity accounts for about 70% now, and the capacity of the country in the next 3-5 years can be expanded by about 20%. The current capacity of Kampuchea is 16%, and the annual capacity is 50 million. The factory will be gradually put into production, the total capacity will be increased to 130 million units / year, Vietnam's current capacity is 16%, and it is expected to achieve 10 million units / months in 2020, and 15 million units / months in 2021.


Although the retail business has been in operation for many years, it has failed to achieve the desired development. In order to further focus on the management of garment manufacturing and better serve customers, Shenzhou International has accelerated the contraction of retail business. By the end of 2019, all retail outlets had been closed. Although the clean-up of retail business has brought about a great short-term and negative impact on the business performance this year, it is believed that it will help enhance the long-term competitiveness of the company's manufacturing industry. The withdrawal of retail business does not change the company's long-standing expectations for the domestic apparel consumer market.


Facing the pressure of textile and garment industry significantly increased, Shenzhou International said in its annual report that the company will continue to attach importance to the rational layout of production base, vertical optimization of industrial chain, continuous innovation of products and sufficient cash reserves. In difficult times, the company will focus more on the accumulation and upgrading of the competitiveness of enterprises, and seek better opportunities for development in the new round of integration.