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Weiqiao Textile reports lower yarn & fabric production
16
Sep '08
Weiqiao Textile Company Limited and its subsidiaries, collectively, the largest cotton textile producer in China, announced its unaudited results for the 6 months ended 30 June 2008.

During the Period, due to the rapid appreciation of the Renminbi, the rise in raw materials and energy costs, the adjustment of State's macroeconomic policies and the slowdown in foreign demand, the cotton textile market of China remained in a depression while market competition further intensified. By leveraging on its brand advantage, large sales network and good customer relationship, the Group was able to maintain stable sales volume for its products under severe conditions of the industry.

Output of the Group's cotton yarn, grey fabric in the first year was 422,000 tons and 751,000,000 metres, respectively, representing a decrease of 3.4% and 3.8% over the same period last year. Output of denim was 88,000,000 metres, which leveled with the same period last year. In the first half of the year, the Group's revenue reaches approximately RMB8,888,000,000, representing a decrease of 4.1% over the same period in 2007.

On the other hand, net profit attributable to equity holders of the Company decreased to approximately RMB273,000,000, representing a decrease of 59.3% from the same period last year. Earnings per share was RMB0.23, representing a decrease of 58.9%. The Board of Directors does not propose an interim dividend.

Commenting on the 1H2008 interim results performance, Ms. Zhang Hongxia, Chairman of Weiqiao Textile, said, “To ensure that the Group to maintain its leading position in this challenging environment, the Group has adopted the important operating principle of “Reduction in profits rather than giving up market share” for this important strategic adjustment period to continue to maintain a strong sales network in order to reap maximum gains when the market recovers.

Despite the fall in profits, the Group could still maintain fundamentally stable sales result, which demonstrated that the Group has established good relationships with its customers and also established a positive brand image.”

Operations Review:
Weiqiao Textile recorded relatively stable sales revenue during the reporting period. Despite the adverse effect of the State's macroeconomic adjustment policies, rise in energy prices and increase in the cost of raw materials, etc. have resulted in the rise in operating costs of the Group, in order to secure market share and stabilise its labour force, the Group adopted the sales strategy of price reduction as it faced significant increase in costs.

The Group considers that the strategy of “Reduction in profits rather than giving up market share” would secure a stable customer base for the Group to the greatest extent, and enable it to achieve greater results by leveraging on its solid customer base and long-term trading relationships when the environment of the cotton textile industry returns to the right track.

Cotton yarn, grey fabric and denim remained the Group's core products by revenue. Revenue by categories accounted for 45.8%, 46.1% and 7.9% of the Group's total revenue respectively.

For the six months ended 30 June 2008, the proportion of revenue from cotton yarn and grey fabric basically leveled that of the same time last year. The proportion of the revenue from denim increased slightly due to the increase in denim sales by the Company to suit the changes in market demand of denim.

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