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Insight | Time: Aug 19 2022 2:08PM  Editor:Tina Kong
Polyester market still under burden in August
 
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End-user market did not show signals to grow since Aug although Sep is supposed to be the traditional peak season. Downstream plants kept running at low capacity for three weeks with weak orders, high stocks, heat temperature, water shortage and power rationing. The operating rate of fabric mills fluctuated around 35-55% in Zhejiang and Jiangsu since Aug and that of DTY plants was around 40-65%. The main reason is that the power rationing policy is not unified and is apparently temporary.

 

Up to now, the operating rate of DTY plants was at 47% in Zhejiang and Jiangsu, near 50% in Xiaoshan, Shaoxing and Changshu, at 40-50% in Taicang, around 40% in Cixin and around 50-60% in Changxing. Operating rate of fabric mills was at 44% in Zhejiang and Jiangsu: around 50-60% for water-jet mills in Wujiang, around 50% for water-jet mills in Changxing, near 40-50% for water-jet plants in North Jiangsu, near 50% for warp knitting plants in Haining, at 30% for warp knitting plants in Changshu, near 30-40% for circular knitting plants in Changshu and Shaoxing. Operating rate of dyeing plants inched up to 49% in Zhejiang and Jiangsu: around 40-50% for plants in Xiaoshan and Shaoxing, near 60% in Wujiang, around 50% in Changxing and Haining and North Jiangsu, and at 20-30% in Changshu. 


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Downstream plants ran at low capacity and had low PFY stocks at hand. By now, the stocks of PFY could mainly guarantee production for around 5-7 days and higher around 15 days. That meant sales of PFY remained bleak and stocks turned to PFY factories again.

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Inventories at fiber plants remained high.

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Feedstock inventory was low. The inventory of grey fabrics sustained as high as above one month, with that of warp knitted fabrics at 30-40 days, that of water-jet fabrics at 40-70 days and that of circular knitted ones lower at 10-15 days.


Orders for some fabrics for autumn and winter apparels appeared on the market. Sales of interlocked circular knitted fabrics were relatively better than other varieties. Orders for some warp knitted velvet fabrics emerged in Changshu and Haining However, peak-season demand has not appeared. Orders were mainly small and sporadic ones.


Players are waiting for the peak season. Feedstock market also remains sluggish. Grey fabric market is dominated weak confidence.


Some textiles and apparels companies successively released half-year annual report. Excluding some sportswear brands, most companies saw falling operating income and net profit on the year.


Nation Company  Industry Performance
China Red Dragonfly Shoes  In the first half of 2022,it realized operating income of 1.121 billion yuan, down 6.65% from the same period last year. The net profit belonging to shareholders of listed companies was 21.0373 million yuan, down 19.11% from the same period last year. 
Lancy Shares Women's clothing  In the first half of 2022, the operating income was about 1.809 billion yuan, an increase of 1.10% over the same period last year; the net profit belonging to shareholders of listed companies was about 9.2488 million yuan, down 90.09% on the year; the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 13.0776 million yuan, down 85.10% year on year. 
Li Ning Sportswear In the first half of 2022, Li Ning had 12.409 billion yuan of revenue, up 21.7% year-on-year; The net profit of returning to the mother was 2.189 billion yuan, up 11.6% on the year; the net profit rate decreased from 19.2% to 17.6%, and the gross profit margin fell by 5.9 percentage points to 50.0%. 
Mushang Group Casual fashion clothing  According to the profit forecast, the net profit of the company for the six was expected to decrease by about 90% compared with the same period last year in the first half of 2022, based on a preliminary assessment of unaudited consolidated management accounts. Of this total, footwear realized revenue of about 6.759 billion yuan, compared with 4.594 billion yuan in the same period last year; clothing revenue of 4.907 billion yuan, a slight decrease of 154 million yuan compared with 5.061 billion yuan last year; and equipment and accessories revenue of 743 million yuan, compared with 541 million yuan in the same period last year. 
Semir Clothing Casual clothing  Net profit fell by more than 80% on annual basis. The company estimates that the net profit attributable to shareholders of listed companies in the first half of 2022 would be 90-130 million Yuan. 
PEACEBIRD Apparel The company expects to achieve a net profit of about 133 million yuan attributable to shareholders of listed companies in the first half of 2022, but about 68% less than the same period last year. 
JOEONE  Men's wear

It is expected that the net profit attributable to shareholders of listed companies in the first half of 2022 would be -65 to -55 million Yuan, which was unprofitable compared with the same period of last year. It realized the net profit of 50-56 million yuan after deducting non-recurring profit and loss belonging to the shareholders of the listed company. 
China Dongxiang  Apparel The operating conditions for the first quarter of fiscal year 2022/23 (as of June 30, 2022). In the first quarter of fiscal year 2022/23, the group's Kappa brand stores (excluding Kappa children's clothing business) saw a 10-20% year-on-year decline in retail sales across the platform. Based on Kappa brand stores (excluding Kappa children's clothing business) that were in operation at the beginning of the same quarter last year, same-store sales across the platform declined by 10-20% on the year in the first quarter of FY2022/23. 
Meters Bonwe  Apparel According to the performance forecast, the company expects a loss of 620-680 million yuan in the first half of 2022, down 1492.73%-1646.86% year on year.
Outside China Adidas Sportswear Income excluding exchange rates was flat from a year ago. In euro terms, revenue in the first six months of 2022 rose 5% to 10.897 billion euros; Gross profit margin fell 1.7 percent to 50.1%; operating profit was 828 million euros; operating profit margin dropped to 7.6% from 12.1% last year; continuing operating net income reached 671 million euros, a decrease of 219 million euros compared with the previous year. 
PUMA  Sportswear (German )
After exchange rate adjustment, sales in the first six months of 2022 rose 19.0% year-on-year to 3.914 billion euros; gross profit margin fell to 46.8%; net profit increased by 30.3% to 206 million euros; profit before interest and tax (EBIT) increased by 30.1% on the year to 342 million euros; profit before interest and tax increased by 30 basis points to 8.7%; and operating expenses increased by 20.2% on annual basis to 1.504 billion euros.


In the second half of 2022, more branded companies are targeted to reduce inventory and the recovery of accounts receivable. Major retailers in the United States have warned that warehouses are full of inventory and goods are piled up seriously. It was reported that the vacancy rate of warehouses nationwide was about 3% in US, while in the port market, the available space was about 1% or less. Sales of clothing, electronics, furniture and other goods are also slowing. Retailers are also aiming to destock in the second half of the year.

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Multi-links including raw material supplier-producer-trader-retailer-port witness high inventory pressure; at the same time, under high inflation, the proportion of consumer expenditure occupied by daily necessities increases, while the consumption expenditure of optional consumer goods such as textile and apparel decreases. The so-called peak season demand in Sep and Oct may be difficult to perform as expected and satisfied.

[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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