For the six months ended 30 June 2008, the Group's domestic sales volume decreased compared to the same period last year, and the decrease in its share of total revenue was due to the effect of domestic economic situations and the decrease in demand of textile products from downstream enterprises in the country.
Gross profit and gross profit margin:
For the six months ended 30 June 2008, the gross profit margin of the Group decreased to 7.6% from the same period last year, which was mainly due to the slowdown of economic growth, the rise in energy and raw materials costs. And in view of the decrease in demand for textile products from downstream enterprises, the Group adopted the strategy of price reduction, resulting in a significant decrease in overall gross profit margin.
Selling and Distribution Costs:
During the first half of 2008, the Group's selling and distribution costs decreased by 8.0% from approximately RMB200 million in the first half of 2007 to approximately RMB184 million, of which transportation costs decreased by 7.5% from approximately RMB160 million in the same period last year to approximately RMB148 million due to the decrease in the proportion of transportation costs of sales born by the Group.
Sales commission decreased 17.6% from approximately RMB17 million in the first half of 2007 to approximately RMB14 million due to the downturn of the textile market and the reduction in the commission rate by the Group.
Administrative Expenses:
For the six months ended 30 June 2008, the Group's administrative expenses were approximately RMB99 million, representing an increase of 22.2% as compared with approximately RMB81 million in the same period last years, which was mainly due to the improvement of staff benefits expenses by the Group.
Finance Costs:
For the six months ended 30 June 2008, finance costs were approximately RMB367 million as compared with RMB373 million over the same period last year. The decrease in the Group's interest bearing bank borrowings resulted in a decrease in interest expense, which has basically offset the increase in interest rate of borrowings.
Prospects:
Weiqiao Textile's Chairman, Ms. Zhang, concluded, “The textile industry of China is transitioning from volume growth to value growth and the pace of integration of the industry has accelerated further. The Group is taking effective measures to actively respond to market changes with its experience accumulated over the years and its good customer base. Each segment of the industrial chain of the Group, from production, research and development to marketing and sales, has abundant human resources as safeguards.
The management of the Group believes that the temporary difficulty faced by the PRC cotton textile industry also provides a good opportunity for restructuring and upgrading of the entire industry, which is beneficial to the elimination of laggard enterprises and production technology while promote the continuing healthy development of qualified enterprises.
As a leading enterprise in the PRC textile industry, Weiqiao Textile will continue to carry out technological reforms proactively and follow the path of industrial upgrade. The Group will continue to improve the technological standard of its production, to produce quality products that are in line with international standards, and make this as the major safeguard for the Group's future development.”
Weiqiao Textile Company Limited
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