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Insight | Time: Sep 24 2020 3:11PM
What is the revenue situation of textile and apparel listed companies in H1 2020?
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In H1 2020, China local entity enterprises was being squeezed by COVID pandemic, tense international trade situation and overall economic downturn. So what was the performance of China's textile and apparel industry?

According to China Customs, exports of textiles and apparels amounted to US$187.4 billion in Jan-Aug, 2020, up by 8.1% y-o-y. Among these, textile export value amounted to about US$104.8 billion in Jan-Aug, 2020, up by 33.4% compared with the same period of last year, and apparel export value reached US$82.6 billion, down by 12.9% on the year. The export value of textile yarn, fabric and finished products increased greatly, mainly due to the substantial increase in overseas demand for protective materials such as masks and gloves. China's textile export value has achieved a significant YoY growth, but the growth rate has declined month-by-month, while the apparel one has shrunk significantly, down by nearly 20%.

Of course, foreign trade data can only reflect one aspect of textiles and apparels export demand. In order to make the situation more intuitive and real, 45 major listed companies in the textile and clothing industry (excluding the main business non-textile and apparel mills) are listed. According to the main business, they can be divided into three categories: textile weaving, home textile/non-woven fabric and apparel.

Textile mills: a few performance benefits from epidemic prevention materials, and that of the most decreases

In H1 2020, 14 listed textile mills saw a year-on-year decrease in revenue, with 11 mills net profit falling. Only Jiangsu Lianfa Textile Co.,Ltd, Huafang Co.,Ltd and Huasheng Co., Ltd. saw increases in the net profit.

From one season data, quarter-on-quarter revenue and net profit of most of the mills improved.

Apparel mills: the performance of categories of apparel mills diversifies, and the overall operation is bleak.

Among the 23 apparel listed companies, 20 companies saw a year-on-year drop in revenue in the first half of 2020, and 19 companies had both revenue and net profit falling.

Only 3 companies achieved revenue growth, of which Peacebird and Anzheng fashion group achieved revenue growth, but their net profit decreased significantly year-on-year, and only Kutesmart achieved double growth.

It is worth noting here that the three companies, Bangjie share, Langsha Group and Hodo, achieved net profit growth in the case of falling revenue.

From one season data, quarter-on-quarter revenue of most companies improved, and the quarter-on-quarter net profit was divided.

Home textile/non-woven fabric mills: the performance of non-woven fabric companies outshines others, and that of home textile mills declines.

Among 8 home textiles/non-woven fabrics listed companies, 6 companies had a year-on-year decrease in revenue in H1 2020. Only Fuanna and Xiamen Yanjan New Material Co., Ltd realized the growth of net profit, and Shanghai Dragon experienced a performance loss.

In conclusion, it can be seen from the above that the vast majority of apparel mills are mainly engaged in home textile and textile weaving. Both business income and net profit of the apparel mills decreased, and the net profit decrement was larger than the revenue. This also means that in the case of sluggish demand and less orders, the apparel mills have to cut price for more sales. The market conditions are tough.

In H1 2020, only 5 companies achieved growth in revenue and 8 in net profit. After analyzing the operating conditions, there were three categories of outstanding companies.

First, driven by the protection materials and feedstock business, sales of melt jet fabric, non-woven fabric and masks increased significantly, which resulted in double increase in revenue and profit, such as Norborg, Yanjan, and Kutesmart. There are also main businesses still for textile weaving and printing and dyeing business, but those who have opened up mask and melt jet production line saw revenue decline but the profit increase, such as Jiangsu Lianfa Textile Co.,Ltd, Huafang Co.,Ltd and Huasheng Co., Ltd., because of the price increase of epidemic prevention materials.

Second, cost cutting and improve performance through strengthening the internal management of the enterprise, and marketing mode change (new retail format, influencer marketing, mini Program ordering, etc.) through channel reform, and product strength improvement, which stabilizes orders and increased revenue. However, due to the discount and promotion, the net profit was often not very good, such as Peacebird and Anzheng fashion.

Third, enterprises benefiting from the home economy have experienced polarization in the textile and apparel industry due to the suppression of travel demand due to the epidemic. The performance of outdoor, women's clothing, fashion and other clothing enterprises has generally declined, while the enterprises mainly engaged in indoor clothing, such as Bangjie share (seamless clothing, including underwear, yoga clothes, etc.) and Langsha Group (mainly engaged in underwear and socks) have little impact on their revenue.

At the same time, the performance decline of most textile and apparel mills in the second quarter may narrow and rebound up. With the stability of the epidemic in H2 2020 and the successful development of the vaccine, demand of the whole industry will slowly recover, and the performance will also increase.

[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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