Weiqiao Textile (02698): Expected Loss Of About 1.6 Billion Yuan In 2022

Weiqiao Textile (02698) recently announced that it is expected that the Group will make a loss in its annual performance as of December 31, 2022.

In 2022, on the one hand, due to the repeated global COVID-19 epidemic, changes in the supply chain structure of the textile market caused by international trade friction and other adverse factors, the domestic and foreign textile markets will continue to be weak, resulting in an overall decline in demand for textiles, which will lead to a corresponding reduction in the group's cotton textile product orders and sales volume year-on-year;

On the other hand, the price of lint, the main raw material required for the production of the Group's textile products, was high at the beginning of the year and low at the end of the year, with the average price rising year on year, and the cost of employees also increased year on year, leading to a sharp rise in the production cost of the Group's textile products. Although the sales prices of the Group's cotton yarn and denim products have slightly increased compared with the same period, the increase in sales prices is less than the increase in production costs, and the sales prices of grey cloth have decreased year on year, resulting in gross loss of the Group's textile business in 2022, which has led to a corresponding increase in the provision for falling price of the Group's inventory, which is not actually a loss;

In 2022, although the power business of the Group maintained its profitability, the price of coal, the main raw material, fluctuated at a high level, and the power cost increased significantly, resulting in a decrease in the unit gross profit implemented in accordance with the provisions of the power supply agreement.

Based on the above main reasons, the Board of Directors expected that the Group would achieve a loss of about 1.6 billion yuan by December 31, 2022. The Board of Directors will pay close attention to the overall industry dynamics of China's textile industry in 2023, timely adjust the Group's operating strategy according to the overall situation of the industry, give full play to its own characteristics and advantages, continue to make great efforts in management innovation, cost reduction and efficiency increase, R&D investment and green intelligent manufacturing, and improve its competitiveness in the domestic and foreign markets.