Recently, when sorting out the third quarter performance reports of textile companies, reporters found that the revenue of many dye companies has declined to varying degrees. Even if some companies’ revenue has increased, the extent has been limited, while net profits have shown a larger The proportion declined year-on-year.
What is the reason for the decline in corporate profits? In the future, how should dye companies maintain their competitiveness and further become better and stronger?
Performance collective “diving”
In the latest three-quarter report disclosed, Zhejiang Longsheng Group Co., Ltd. has continued its “overlord” status for many years. In the third quarter, it achieved operating income of approximately 4.153 billion yuan, a year-on-year increase of 12.24%. However, compared with last year, the net profit attributable to shareholders of listed companies was only 482 million yuan, a year-on-year decrease of 45.91%. Shanghai Anoqi Group Co., Ltd., which had excellent revenue performance in previous years, also saw a decline in net profit in the third quarter of this year. Its operating income in the third quarter was 259 million yuan, a year-on-year increase of 0.99%; the net profit attributable to shareholders of the listed company was 25.1911 million yuan, a year-on-year decrease of 27.95%.
In addition, Zhejiang Jihua Group Co., Ltd., which ranks among the top three in the country in terms of production scale of dyes and related intermediates, had main operating income of 547 million yuan in the third quarter, a year-on-year decrease of 1.59%; net profit attributable to the parent company was 9.941 million yuan, a year-on-year decrease of 84.75% . Zhejiang Haixiang Pharmaceutical Co., Ltd., a long-established dye company, had main operating income of 602 million yuan in the third quarter, a year-on-year decrease of 6.52%; net profit attributable to the parent company was 16.1543 million yuan, a year-on-year decrease of 83.23%.
The collective “diving” of the dye industry’s third-quarter report card is indeed somewhat unexpected. According to data from the National Bureau of Statistics, from January to September, the output of printed and dyed fabrics by enterprises above designated size in my country’s printing and dyeing industry was 44.286 billion meters, a year-on-year increase of 21.11%. The two-year average growth rate was 5.34%. The two-year average growth rate was higher than the growth rate in the same period in 2019. , indicating that industry production has recovered and exceeded pre-epidemic levels.
The economic operation data of the printing and dyeing industry recently released by the China Printing and Dyeing Industry Association for the first three quarters also show that in the first three quarters, my country’s printing and dyeing industry has basically maintained a good trend of restorative development in the face of complex and severe domestic and international situations. As the production capacity of the printing and dyeing industry is gradually released, the main operating quality indicators of the industry are stable and improving, and the operating efficiency of enterprises continues to improve. However, it is worth noting that due to repeated global epidemics, the textile industry chain and supply chain have not been fully restored; energy shortages, high commodity and raw material prices and other issues still affect the industry’s progress. The report specifically pointed out that in the first three quarters, the output of printed and dyed fabrics showed a trend of “high at first and then low”.
Looking back on recent months, since July, printing and dyeing enterprises have entered the traditional off-season, dye transaction volume has shrunk, and product prices have been hovering at low levels. This situation continued until mid-to-late August. At the end of August, due to the impact of excessive currency issuance and inflation expectations, global commodity prices have been rising. Dye prices have been driven by costs and have risen several times. However, due to insufficient demand for downstream printing and dyeing and limited start-up, there has been a strong price-cutting sentiment, leading to an increase in dye prices. limited.
“The direct consequence of insufficient demand is that product prices fall and corporate profits decline.” Wang Zhe, a researcher at CITIC Securities Co., Ltd., said that in the first three quarters of the dye market, the overall average price was still at a relatively low level. The average prices of disperse and reactive dyes in the third quarter were 23.92 yuan/kg and 20.22 yuan/kg respectively, down 0.12% and 6.8% respectively from the previous quarter. “The cost of dyes has also increased during this period. Driven by the increase in the prices of basic chemical raw materials, the prices of dye intermediates have risen one after another, further squeezing the profit margins of dye companies.”
Peak season shortened
Dye companies are suffering from the double attack of weak downstream demand and rising upstream costs. Since late September, major production provinces in the printing and dyeing industry have successively introduced “dual control” policies on energy consumption. Affected by power restrictions and production restrictions, companies have compressed production and operations, and the impact continues to this day. The dye industry’s market situation in the fourth quarter is even less optimistic.
Monitoring data from the colorful cloud dyeing e-commerce platform shows that although it coincides with the “Golden Nine and Silver Ten”, the ex-factory price of dye manufacturers has been rising in October, and the ex-factory price of dispersed black ECT 300% has risen to 42 yuan/kg. However, the actual transaction price in the market is much lower than the ex-factory price of dye manufacturers. The actual transaction price in September was 24 yuan/kg to 25 yuan/kg, and the price in October dropped to 22 yuan/kg to 23 yuan/kg. The reason is that printing and dyeing enterprises generally report that the fourth quarter of previous years and January of the next year are both peak seasons, but the duration of the peak season this year has shrunk significantly, and only October and November are expected to have more orders.
Obviously, printing and dyeing companies’ judgment on order trends affects their willingness to purchase and stock dyes. However, Wang Zhe said that although the short-term dye market is in a consolidation stage, he is still optimistic about the continued clearing of backward production capacity of dyes and other high-energy-consuming enterprises under dual energy consumption control, and the subsequent prices of dyes of listed companies are expected to rise.
Based on their own production and operation status and their feelings about the market, some dye companies have also made outlook for the fourth quarter. Overall, companies are more cautious in their judgments on industry prosperity in the fourth quarter.�, it is generally believed that the performance in the fourth quarter may be the same as that in the third quarter. Specifically, it is expected that production will maintain stable operation in the fourth quarter; new orders may increase slightly, and market demand is expected to expand; raw material prices may fall back from high levels.
The China Dyestuff Industry Association stated that in the first half of the year, the overall economic performance indicators of my country’s dye industry showed higher growth than the same period last year, and output and export volume increased significantly compared with the same period last year. It is expected that the dye industry will continue to recover in the future. However, it is worth noting that there are still uncertainties in the overall development of the industry. The foundation for a comprehensive and sustained recovery needs to be further consolidated. Stabilizing growth and improving quality and efficiency still face greater challenges.
“Cold winter” must be “stabilized”
The market environment is unpredictable. In this regard, industry insiders suggest that while actively exploring market opportunities, dye companies should carefully maintain low-speed operations and strengthen internal skills to survive difficult times smoothly.
“In terms of policies, dye companies should pay more attention to various policies issued by the central and local governments and make full use of them. In terms of production, dye companies should do a good job in technical transformation and training during the suspension of production, and qualified companies should appropriately reserve raw materials and products, pay attention to customers’ operating conditions, prevent risks, and pay attention to capital security.” said Cheng Jintao, executive deputy secretary-general of the Asian Dyestuff Industry Federation.
Ou Qi, deputy director of the technology center of Zhejiang Longsheng Group Co., Ltd., pointed out that dye companies now urgently need to plug loopholes and strengthen their weaknesses. In response to some problems exposed by the decline in international competitiveness of the dye and intermediate industry chain, enterprises must consolidate the basic industrial capabilities, accelerate transformation and upgrading to make up for shortcomings, and in particular, concentrate their superior forces on scientific and technological research and joint research to accelerate breakthroughs. Patch short-term technologies and core technology products, and steadily carry out mergers and acquisitions that are conducive to industrial collaboration, technology introduction, talent sharing, brand value-added, etc., to enhance the competitiveness and resilience of the industrial chain.
Ou Qi also pointed out that the dye industry should build an industrial chain collaborative innovation platform. Solve the problem of dispersed innovation carrier resources and single strength, strengthen the overall layout of innovation system construction and innovation chain coordination, take the enterprise as the leader, integrate the upstream and downstream of the industrial chain, scientific research institutions, universities and other innovative resources, and form a group of enterprises based on industrialization needs. An industrial innovation alliance focusing on orientation and application innovation will strengthen the research and development of common technologies across the industry. Encourage and guide core enterprises in the industrial chain to upgrade existing R&D institutions, build open, collaborative, and efficient common technology innovation platforms such as enterprise central research institutes, and drive upstream and downstream enterprises in the industrial chain to improve their innovation capabilities.
Looking to the future, industry insiders pointed out that in addition to keeping pace with the market, dye companies must also have a normal mind. In a complex and ever-changing market environment, dye companies must remain rational, adjust marketing strategies in a timely manner according to changes in market rhythm, transform business models, prevent market risks, and achieve profitability.
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