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Weiqiao Textile Announces Its 2013 Interim Results

              Weiqiao Textile Announces Its 2013 Interim Results

Strengthened cost control, optimized products portfolio

Continued leadership in industry consolidation

PR Newswire

HONG KONG, Aug. 26, 2013

HONG KONG, Aug. 26, 2013 /PRNewswire/ -- 

Financial Summary

  oRevenue was approximately RMB6,702 million, representing a decrease of
    approximately 13.1% over the corresponding period of last year.
  oGross profit was approximately RMB602 million, representing an increase of
    approximately 43.6% over the corresponding period of last year.
  oNet profit attributable to owners of the parent was approximately RMB266
    million, representing a significant increase of approximately 392.6% over
    the corresponding period of last year.
  oGross profit margin was approximately 9.0%, representing an increase of
    3.6 percentage points as compared with the gross profit margin of
    approximately 5.4% for the corresponding period of last year.

Weiqiao Textile Company Limited ("the Company" or "Weiqiao Textile") and its
subsidiaries, collectively the "Group") (HKEX: 2698), the largest cotton
textile producer in China, announced its interim results for the six months
ended June 30, 2013 (the "Review Period" or the "Period").

In the first half of 2013, the overall textile industry in China was under
increasing pressure to transform and faced an unfavorable export environment
due to the slow recovery of the global economy. Fortunately, the narrowed
price gap between domestic cotton and overseas cotton helped China's textile
and apparel regain competitiveness in the global market. As the reduction in
high cost inventories was almost completed and order mix was improved, the
performance of the textile and apparel industry of China improved during the
first half of 2013 compared to 2012.

During the period under review, China's exports of textile products totaled
approximately US$51.2 billion, up by approximately 10.1% compared with the
corresponding period of last year. The growth rate increased by approximately
8.8 percentage points from approximately 1.3% in the corresponding period of
2012.

In the first half of 2013, the Group's production volume of cotton yarn was
approximately 238,000 tons, representing an increase of approximately 15.5% as
compared with the same period of last year. The main reason was that the Group
increased the output of cotton yarn according to market demand during the
Period as inventory products were gradually reduced. The production volume of
grey fabric was approximately 491 million meters. The output of grey fabric
remained flat as compared with the same period of last year. The production
volume of denim was approximately 36 million meters, representing a decrease
of 14.3% as compared with the same period of last year, which was mainly due
to an adjustment to the Group's product portfolios to increase the output of
high-end denim in light of the market conditions.

For the six months ended 30 June 2013, the Group's revenue was approximately
RMB6,702 million, representing a decrease of approximately 13.1% as compared
with the corresponding period of 2012.The overall decrease was mainly
attributable to the decrease in sales volume of cotton yarn of the Group
during the Period as compared with the corresponding period of last year. Net
profit attributable to owners of the parent was approximately RMB266 million,
representing a significant increase of approximately 392.6% from the
corresponding period of 2012. Apart from the lower comparative base of profits
for the same period of last year, the increase was mainly attributable to the
improvement in gross profits due to the decline in unit cost of sales, the
rise in profit generated from the sale of electricity as a result of reduced
coal price and the reduced finance costs of the Group during the same period.

For the six months ended 30 June 2013, the gross profit of the Group increased
by approximately 43.6% from the corresponding period of last year to
approximately RMB602 million. The increase was mainly attributable to the
reduction in inventory of finished products with higher unit costs by the
Group in 2012, leading to a decrease in unit cost of sales for the first half
of 2013, and thus the profitability was enhanced under stable average selling
prices conditions. As a result, the gross profit margin of the Group increased
from approximately 5.4% during the corresponding period of last year to
approximately 9.0%. For the six months ended 30 June 2013, basic earnings per
share of the Company were RMB0.22. The Board of the Company did not recommend
any payment of the interim dividend for the six months ended 30 June 2013.

Commenting on the first half of 2013 interim results performance, Ms. Zhang
Hongxia, Chairman of Weiqiao Textile, said, "During the Period under Review,
insufficient overseas demand, a slowdown in the growth in domestic demand, a
gap between domestic and overseas cotton prices, and the increase in the
production costs including labour cost were still the major issues that
affected China's textile industry during the Period."

Business Review

In the first half of 2013, adverse factors such as weak demand and large
cotton price gap between domestic and overseas markets still haunted the
cotton textile industry in China. However, taking a market demand-oriented
approach, Weiqiao Textile firmly grasped the opportunity to boost sales with a
more flexible sales strategy, thus, further enhancing the Group's competitive
advantages and its leading industry position.

During the Period, the approximate percentage of revenue contributed by the
Group's cotton yarn, Grey fabric and denim are 35.8%、56.5% and 7.7%. The
charts below are a comparison of the breakdown of revenue by products for the
six months ended 30 June 2013 and the corresponding period of 2012,
respectively:

            Six-month period    Six-month period          Approximate
                                                          Percentage of
            ended               ended              Change Group's revenue
Product                                                   for the six months
            30June2013 30June2012 (%)    ended 30 June 2013
                                                          (%)
            RMB'000             RMB'000
Cottonyarn 2,400,000           3,692,000          -35.0  35.8
Grey fabric 3,783,000           3,563,000          6.2    56.5
Denim       519,000             453,000            14.6   7.7
Others      -                   1,000              -      0.0
Total       6,702,000           7,709,000          -13.1  100.0

For the six months ended 30 June 2013, the proportion of revenue contributed
by the Group's cotton yarn decreased as compared with the corresponding period
of last year. The decrease was mainly attributable to the drop in revenue from
cotton yarn resulting from the decrease in sales volume of cotton yarn as
compared with the corresponding period of last year. The decrease in sales
volume was mainly due to a higher comparable base caused by the Group's
efforts in reducing part of cotton yarn inventory during the corresponding
period of last year. The increase in the proportion of revenue contributed by
grey fabric and denim was due to the market demand-oriented approach and the
flexible sales strategy adopted by the Group, leading to an increase in sales
volume of grey fabric and denim.

The following table shows the geographic breakdown of revenue for the six
months ended 30 June 2013 and the corresponding period of 2012:

                                                                       Approximate
                                           Six-month period
             Six-month period ended                                    Percentage
                                           ended                       of
Geographical 30June2013                      Change Group's
                                           30June2012        revenue
location     RMB'000                                            (%)
                                           RMB'000                     for the six
                                                                      months
                                                                      ended 30
                                                                       June 2013
                                                                       (%)
Mainland     3,415,000                     5,778,000            -40.9  51.0
China
Hong Kong    1,714,000                     733,000              133.8  25.6
East         566,000                       439,000              28.9   8.4
Asia^(1)
Others^(2)   1,007,000                     759,000              32.7   15.0
Note(1): East Asia includes Japan and South Korea;
Note(2): Others mainly include Southeast Asia, the US, Europe, Taiwan and Africa.

Selling and Distribution Expenses

For the six months ended 30 June 2013, the Group's selling and distribution
expenses were approximately RMB103 million, representing a decrease of
approximately 1.9% from approximately RMB105 million for the same period of
last year. Among those costs, transportation cost decreased by approximately
16.9% to approximately RMB64 million from approximately RMB77 million for the
same period of last year. This was mainly due to the fees for transportation
resulting from lower unit price for export transportation while export sales
increased and domestic sales decreased during the Period. Salary of sales
staff was approximately RMB17 million, representing an increase of
approximately 30.8% from approximately RMB13 million for the corresponding
period of last year. The increase was due to the growth in export orders
achieved by the clients of certain domestic sales staff during the Period,
leading to corresponding increase in the compensation of such sales staff.
Sales commission was approximately RMB6 million, which remained flat as
compared with the corresponding period of last year.

Administrative Expenses

For the six months ended 30 June 2013, the administrative expenses of the
Group was approximately RMB141 million, representing an increase of
approximately 19.5% from approximately RMB118 million for the corresponding
period of last year. Such increase was primarily due to the Group's inclusion
of the depreciation costs incurred by idle properties in the administrative
expenses according to accounting standards during the Period.

Finance Costs

For the six months ended 30 June 2013, finance costs of the Group were
approximately RMB268 million, representing a decrease of approximately 17.0%
from approximately RMB323 million for the corresponding period of last year,
which was mainly attributable to the decrease in bank borrowings during the
Period and the drop in the average borrowing rate.

Outlook

Looking ahead, while the global economy is still subject to uncertainties,
China's textile industry is entering a stage of profound adjustments given the
anticipated significant increases in the costs of labor, energy, and raw
materials. Weiqiao Textile will continue to overcome challenges and seize
opportunities mainly through continuously optimizing its product mix,
increasing its market share of mid-end and high-end products, and enhancing
products' value-added features. In response to the rising labor costs, the
Company will improve the facilities' operational efficiency and increase its
level of automation to reduce labor intensity (measured by workers needed per
ten thousand spindles). The Company will also strategically modify the mix of
imported cotton and domestic cotton to reduce raw material costs. The
Company's exports to emerging markets are expected to increase as a result of
optimized the structure of domestic and international trade and the
development of products tailored for emerging markets. Financially, the
Company will further optimize its debt structure and control its finance
costs. Weiqiao Textile will continue to focus on environmental protection and
sustainable development, solidify its position as an industry leader, and
continue to commit to its social responsibility. With its positive brand
image, extensive operational experience and a strong balance sheet, the Group
is confident that it will maintain its position as the most preferred cotton
textile provider in China and the top choice for global buyers.

About Weiqiao Textile

Weiqiao Textile Company Limited, a non state-owned enterprise, is the largest
cotton textile producer in the PRC, specializing in the production, sales and
distribution of cotton yarn, grey fabric and denim. During the past ten years,
the Group developed large-scale production capabilities by capitalizing on
China's rapid economic growth. It has achieved a strong position in the
global textile markets by employing advanced technology in state-of-the-art
facilities. Weiqiao Textile is located in Shandong, China's second largest
cotton producing province. The Group has four production bases in Weiqiao,
Binzhou, Weihai and Zouping and employs approximately 87,000 people. As at
June 30 2013, the Group produced approximately 238,000 tons of cotton yarn,
491,000,000 meters of grey fabric and 36,000,000 meters of denim.

Disclaimer

This press release distributed herewith includes forward-looking statements.
All statements, other than statements of historical facts, that address
activities, events or developments that Weiqiao Textile expects or anticipates
will or may occur in the future (including but not limited to projections,
targets, estimates and business plans) are forward-looking statements.
Weiqiao Textile's actual results or developments may differ materially from
those indicated by these forward-looking statements as a result of various
factors and uncertainties, including but not limited to price fluctuations,
actual demand, exchange rate fluctuations, market shares, competition,
environmental risks, changes in legal, financial and regulatory frameworks,
international economic and financial market conditions, political risks,
project delay, project approval, cost estimates and other risks and factors
beyond our control. In addition, Weiqiao Textile makes the forward-looking
statements referred to herein as of today and undertakes no obligation to
update these statements.



Investor/Media Enquiries:
Mr. Chen Yuanyuan                   Ms. Wei Wei

Christensen                         Christensen

Email: ychen@ChristensenIR.com      Email: weiwei@ChristensenIR.com

Tel: +852-2232-3918/ +852-6954-7509 Tel: +852-2232-3966/ +852-5345-9399

Fax: +852-2117-0869                 Fax: +852-2117-0869

SOURCE Weiqiao Texitle
 
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