Tianhong Textile's net profit increased twice in the first half year-on-year

Tianhong Textile disclosed yesterday that its turnover in the first half of this year rose by 8.5% from the same period last year to 3.609 billion yuan, while net profit tripled from the same period last year to 467 million yuan.

Inspired by the freedom to import international cotton and low labor costs, Rainbow Textile decided in 2006 to build a textile mill in Vietnam and continue to increase investment. In the past two years, as China's cotton price is much higher than that of the international market, Rainbow Textile enjoys a huge cost advantage and its performance is better than its domestic counterparts.

At present, the first phase of Tianhong Textile's northern Vietnam project (about 170,000 spindles and 30 rotor spinning machines) was fully put into operation in July this year. The group’s other new production capacity in Vietnam and China totals about 600,000. The spindles are also expected to be fully operational in the third quarter of this year. Rainbow Textile stated that if there is no major change in the product mix, the annual yarn production capacity will reach approximately 440,000 tons.

At the same time, the second phase of the Northern Vietnam project, with a total investment of approximately 1.35 billion yuan, and the expansion of newly purchased Shandong production facilities, will all be "acquired" in the second half of next year. It is expected that the new production facility will bring about 120,000 tons of annual production.

In contrast, many domestic counterparts, such as Shenzhou International, even though they also have production lines overseas, have fallen behind Tianhong Textile in terms of time.

In order to reduce the impact of cotton price fluctuations on performance, Rainbow Textile not only continuously increases the input of overseas production capacity, but also starts to strengthen other differentiated products in addition to the core yarn market. Rainbow said that orders from some customers, such as the Toray Group in Japan and other customers in Fujian, China, are expected to double, and the proportion of chemical fiber and knitted yarn products will also increase.

Since the price difference between domestic and foreign cotton prices has narrowed in the first half of this year, and Tianhong Textile has certain cotton orders and stocks, the overall gross profit margin has also increased from 13.4% in the same period last year to 21.4%.

The data shows that due to the increase in bookings for overseas cotton, as of the first half of this year, the Rainbow Textile cotton inventory was 100,000 tons, worth 1.25 billion yuan.

Tianhong Textile's dazzling results were not combined. The CITIC Securities Research Report pointed out that the steady increase in beneficiary orders and the recovery of gross margins, and the profitability of processing and manufacturing enterprises in the first half of this year will generally be better than the same period of last year. Cotton spinning companies have performed particularly well. Judging from the performance forecast for the first half of this year, the profit performance of the upstream textile manufacturing industry is also better than that of the downstream brand apparel companies.

Another source said that the domestic cotton purchasing and storage policy adjustment is in progress. According to analysis, once the cotton price is determined by the market, the cotton price may drop significantly, and domestic textile companies will not suffer losses in cost.