Status quo of China’s wool textile:releasing pressure & seeking opportunity

By+Shen+Da

Although market demand at home and abroad came down comparing with to the same period of 2015， and the growth of operation benefits dived， and enterprises burden was more heavier， Chinas wool textile industry maintained smooth operation. According to the feedback of China National Textile & Apparel Councils questionnaire for enterprise operators， wool textile enterprises predicted that the next performance will maintain the level of the first quarter without obvious improvement， which based on the fact that 80% of the respondents thought the operational status of the first quarter was as common； 50% said that the number of orders in the first quarter was flat against the previous period， 40% of which with less foreign orders； 66.7% indicated that the production in the first quarter was flat over the same period.

Analysis of industrial operating dataSustained slowdown in growth & modest increase on profit

From production data， in the first three months of this year， wool yarn production of enterprises above designated size was 0.0868 million tons， up 2.82%， with growth rising 6.70 percentage points； production of wool fabric reached to 0.122 billion meters， down 7.86%， 8.77 percentage points less than the same period last year.

In terms of domestic market， according to the National Bureau of statistics， from January to March， retail sales growth of clothing， shoes and needles textiles was 7.2%， down 3.3 percentage points over the same period of 2015. According to the statistics of China National Commercial Information Center， clothing retail sales of national hundred key large-scale retail enterprises fell by 5.1%， 9 percentage points in growth less than the same period， as well as clothing sales of various kinds dived by 0.5%， 6.4 percentage points in growth lower than the same period last year.

In terms of import and export market， according to Customs data of the first quarter， total import-export volume of wool raw materials and products reached 2.84 billion dollars from Jan. to Mar.， down 8.52% year on year， with total exports of 2.032 billion dollars， down 9.23%， and total imports of 0.809 billion dollars， down 6.67%.

In the main export markets， wool product market showed a decline in the first quarter， EU， ASEAN and the United States down 1.82%， 0.04% and 3.95% respectively， which less than the drop of 9.23% of total export.

From January to March， although the top 5 provinces created 71% of total exports of wool textile， they all suffered decline in exports， especially for Zhejiang Province， with a faster decline of 18.76%.endprint

In the first quarter， total export of wool， a main raw material of wool textile， added up to 0.086 million tons， a slight drop of 0.1%， basically flat with the same period of 2015， and average unit price of wool fell by 3.2%.

From the analysis of operation and efficiency， economic operation index of wool textile continued to be in lower growth in the first quarter. According to the National Bureau of Statistics， 1194 wool textile enterprises achieved main business income of 54.521 billion yuan， an increase of 1.86%， less than 5.1% of textile industry， and their total profits registered 2.528 billion yuan， up 5.33%.

From January to March， total assets turnover rate of wool textile enterprises above designated size was 1.1 times per year， down 4.31%； finished products turnover rate was 11.9 times per year， down 3.12%； asset-liability ratio was 56.14%， up 1.94 percentage points. The average profit margin was 4.64%， basically the same with 2015. （source： China Wool Textile Association）

Quarterly analysis of listed companiesOperating smoothly or unsmoothly & Profit upwards or downwards

In the eight wool listed companies， three companies realized double promotion on main business revenue and net profit； two companies achieved one ascension on main business income； two companies arrived at single promotion on net profit； only one company suffered double fall on main business revenue and net profit.

In the first quarter， Jiangsu Sunshine achieved the largest increase by 571.82%， while Zhongyin cashmere international group faced the largest decline by -1772.62%.

Specifically， Xinao company， with the main industry of wool textile， has achieved 0.806 billion yuan ranking at “NO1” in woolen sector of 2015. Keeping last years growth， the company realized the strategy of “Machine replaces human”， alleviated the pressure from the constant rise of labor costs， enhanced automation degree of equipment， and improved labor productivity， which indicated that reducing staff for greater efficiency could increase profitability.

Also with wool as the main industry， Zhongyin cashmere international group was very different from Xinao company in operating situation， where it ranked at the bottom due to huge deficit of 0.874 billion yuan in 2015， as well as ranking last for its net profit below thousands in the first quarter， which aroused much concern about its management.

Business strategy of listed companiesreinforcing advantages & overcoming obstacles Shandong Ruyi： a slight fall in main income in poor economic environmentendprint

Shandong Ruyi suffered a slight fall in main business income to 0.109 billion yuan， but achieved net profit to 0.004 billion yuan， up 5.72%， due to the cost reduction under the innovation of design and fabric. Although the light luxury brands Sandro and Maje didnt show their financial data， they will be powerful to boost profits of Shandong Ruyi， by virtue of their strong growth momentum as well as the potential of light luxury market.

In addition， Shandong Ruyi adjusted business performance expectation of the first half of 2016 fiscal year and still took cautious attitude with stable income.

Affected by macro environment， Shandong Ruyi will adjust net profit expectation to -23.87%～ 14.19%， and expected amount of net profit revenue to 90 million yuan ～ 13.5 million yuan， under the severe domestic and foreign markets， although its revenue performance was flat over the same period last year， a person in charge of Shandong Ruyi said.

Jiangsu Sunshine： accelerating overseas layout & exploring international market

The net profit growth of Jiangsu Sunshine reached to 571.82% in the first quarter. Jiangsu Sunshine and Ethiopia reached an agreement in the middle of March， which is that Jiangsu Sunshine invests 0.98 billion dollars to establish industrial park famous for wool textile in Adama city， of which 0.32 billion dollars will be used to establish complete production chain from top dyeing， spinning， weaving， after finishing to finished garments， realizing production capacity of 0.05 million spindles， 10 million meters of worsted fabric and one million sets of high-quality suits.

Industry insiders think that setting up subsidiaries helps transfer capacity， cut labor costs， reduce international logistics expenses， as well as in favor of the listed companies to continually explore the international market， further improve and enhance companies industrial development layout， improve cost-competitiveness and service capacity of the international market， enabling the company to obtain a strong ability of sustainable development and management. In order to adapt to the domestic economic situation and industry trend， Jiangsu Sunshine established companies of woolen spinning weaving and dyeing at abroad， helping listed companies to explore new markets， reduce costs and enhance international competitive capability.

Xinao company： obvious technical advantages& positive future development

The net profit of Xinao company was 0.031 billion yuan， up 17.26% year-on-year. Positioning in high-end market and supplying for worldwide luxury brands， the company cooperated with Ports， Elegant Prosper and others at home， as well as numerous well-known brands at abroad， as gold supplier of H&M. The company has a little more than 1% of market share at present， focusing on highend market， and will march into European highend luxury market in the future.

Xinao company expand production of 30 thousand spindles to enhance the overall capacity. The company plans to invest 0.65 billion yuan to expand production of 30 thousand spindles in three years， on the basis of current production of 70 thousand spindles， aiming to achieve production of 0.1 million spindles in 2018， with annual output value more than 1.5 billion yuan， equipment to intellectualization and specialization， as well as improvement of gross margin. In addition， Xinao has obvious advantages in product quality， labor cost， rapid response capacity and so on， and it also intends to acquire a senior Italian factory to enter high-end wool spinning field. Professionals predict that the net profit of Xinao company will be around 0.16 billion yuan.endprint