Export manufacturing industry starts profit protection battle

Thanksgiving Day opened the prelude to the US retail golden season. Chinese export companies are still calculating how they can “take more than three or five buckets”.

Although the industry situation is different, but under the pressure of rising costs, the exchange rate changes have caused Shenzhen and the Pearl River Delta's export manufacturing industry to see the pressure on the critical point of profit.

How should they deal with them?

Shenzhen Business Daily reporter Qian Feiming Chen Meishou November 25, Thanksgiving Day.

The “Thanksgiving Christmas Month,” which began with this, determines the annual one-third of the US retail industry’s harvest. The Wall Street Journal reported on the 24th that U.S. consumer confidence has significantly improved in late November, and the final value of the consumer confidence index released by Reuters and the Michigan Grand Government rose to 71.6, and the final value of the index in October 67.7. The good news also includes: The latest survey released by the American Consumers Union and the National Association of Credit Unions shows that more Americans believe that their financial situation has improved and that the number of people who decided to increase shopping during the holiday season has also increased from 8% last year to 10%; The American Automobile Association, which has 45 million members in its circle, also predicts that Americans traveling on Thanksgiving weekend will increase by 11% compared to 2009. Not only will 42.2 million people go to play 80 kilometers away from home, but also on average for each family. Thanksgiving spending has also increased dramatically to $500.

This year’s Thanksgiving sales may increase by 2 to 4 percentage points from previous years. Saks, Wal-Mart, Macy’s, and other US supermarkets have similar judgments in media reports: After two consecutive years of neglect, a National People’s Congress shopping spree Season seems to be coming again.

While US businesses are recovering, Chinese export companies are figuring out how to “take more than three or five fights”.

As the cost rises and the exchange rate changes, export companies have reached the "profit tipping point."

"October data show that due to the impact of exchange rate changes, toy exporters' profit rate has decreased by approximately 1.8%. For ordinary toy industries with only about 3% profit, it is undoubtedly not an optimistic figure." Secretary General, Shenzhen Toy Industry Association Liu Yanfang expressed this. This is a bitter harvest. When the Chinese toys prepared for Thanksgiving and Christmas began to pack in June and July, the exchange rate of the *** exchange rate was stopped once more. On June 19 of this year, the Central Bank announced that it would further improve the reform of the exchange rate formation mechanism, and the exchange rate against the US dollar has since appreciated by 2.5%.

"Losing is impossible, but it is so good that you don't have any addictions." Chen Yonghan, a member of the Xinhe Electric Wire Group, seemed helpless. “It is the US dollar that is collected, and the payment is ***. Think about it, the Hong Kong dollar is now 0.85 for exchange.” At an internal conference on the 18th of this month, the Shenzhen Association of Processing Trade Enterprises Association Long is not optimistic about the prospects: "I don't know what the price is for the next one. All of them are yelling for help and everyone seems to be crippled."

Behind the calculations is a tug of war to defend profits. Although the industry situation is different, but under the pressure of rising costs, the exchange rate changes have caused Shenzhen and the Pearl River Delta's export manufacturing industry to see the pressure on the critical point of profit.

how to respond?

Price increase is an inevitable choice. At this year's Canton Fair, American, Gree, Galanz and other air-conditioning companies invariably chose to increase prices. Dong Xiaohua, director of Midea Group Brand Management Department, told Shenzhen Daily News last week that the export quotation of Midea air conditioners at the Canton Fair increased by 5% to 10%. In the exchange rate impact survey started by the Shenzhen Processing Trade Association in June, 66% of the respondents clearly stated that they would not lower prices, and quite a few companies would choose to increase their quotation. In the same survey, 47% of companies believe that the impact of exchange rate appreciation on profits is “extremely large”, 50% of companies consider “influence”, and only one company considers “no effect”, but this company's reported figures show that profits have shrunk. The scale is more than 5 million yuan.

Break orders are also an option. Chen Yonghan, an old friend of clothing, gave up orders he had just received at the Canton Fair. The problems faced by Hong Kong businessmen with more than 60 factories included soaring cotton and hard-to-find workers. "No money to make, what are the tigers? Doing less and keeping strength is the most important thing." Chen Yonghan said that this year's exports are about 30% less, and he is considering making the factory leave in advance. This Hong Kong businessman who had invested heavily since 1981 had 1,200 employees during the peak period of the factory, and it is now only 700 people. In the toy industry, Liu Yanfang also heard the rare news: The orders of the toy giant Mattel, in the past was to grab the head. Now everyone is weighing and weighing.

The other side of the bank's shopping season has just begun.

Many companies have singles that they would not accept the current round of appreciation starting in June, which made exporters somewhat unprepared. The appreciation cycle coincided with the peak of shipments. The contracts signed in the early days were greatly affected, and many orders became money-losing contracts, and some companies suffered losses. Orders will even have two to three percent,” said Liu Yanfang, secretary-general of the Shenzhen Toys Industry Association. Although companies generally agree that they can internalize changes in exchange rates, the increase in *** has approached the “critical point” of some companies. Many companies have “no orders”. Dare to take". Xinhua News Agency in the toy city of Chenghai survey also showed that the exchange rate changes equal to eaten 2% of the toy company's profits, the report mentioned Santa toys, the original estimated gross profit can reach 0.4 US dollars, but the final afterwards each inverted Loss of $ 0.45.

The latest survey results made by the Shenzhen Processing Trade Enterprises Association also show that the impact of the *** appreciation is worrying, and in particular, the profitability is not optimistic. Only one of the interviewed companies said that there was no impact. According to the survey data, 34% of enterprises have reduced their profits below 500,000 yuan, 9% between 500,000 and 1 million, 40% between 1 million and 5 million, and 17% have affected more than 5 million yuan.

In fact, Shenzhen's processing trade enterprises are not short of orders this year, followed by a complex sense of "increasing production without increasing income." Hong Chung, an Honorary Consultant of the Hong Kong Chinese Optical Manufacturers Association, said in an interview with a Shenzhen Business Daily reporter that orders within the industry have returned to normal this year. The situation should be quite good, but the overall profit is going down. The reason why profits go down is simple: cost. Chen Yonghan’s day of “difficult” days, the spot copper price in Shanghai rose by 850 yuan per ton; on the day of the Canton Fair on November 4th, the price of cotton yarn was already around 40,000 yuan per ton.

Liu Yanfang’s hands have raw material cost figures for the two member companies in October. For a plastic toy, as the price of crude oil rose by 8%, the plastics of downstream products rose by about 15%; the other one was made of plush toys, also because the price of crude oil rose, and the downstream products of PP cotton were the main ingredients. Within a day, the price rose from 9800 yuan per ton to 11,000 yuan, and the cotton price that hit a 10-year high also made it difficult for companies to accept. Another group of figures also stated that in the past three months, fabrics have risen from RMB 12 to RMB 17 per meter, wood has increased by 30%, aluminum has increased by 5%, and even packaging cartons have increased by 10%. In the survey conducted by the association, some factories that used metal toys simply stopped working, and the income from raw materials fell far higher than that of toys.

Since the exchange rate reform began on July 21, 2005, the *** has “broken 8” and “broken 7” against the US dollar, and the actual appreciation has exceeded 20%. An exporter stated that even in the first two years of the financial crisis, orders remained profitable because the price of raw materials did not rise, but now the US economy has recovered, and soaring raw materials are unbearable. "The exchange rate fluctuations can be internally digested, but the increase in costs cannot be swallowed up." The businessman said so. A number of people in the industry interviewed said that the pressure for appreciation was so great that the fundamental reason was that raw materials and other costs rose too quickly. The increase in costs also includes wages. The biggest difficulty in Li Chunfang’s factory is that he cannot recruit workers: “The basic salary is 1,100 yuan, which is definitely not enough to recruit people; raising it to 1300 yuan is still not enough. Now, the average worker’s income is now around 2,000 yuan. ."

All the way up is worrying, and there is also an outside environment. Zheng Jianguo, deputy secretary-general of the Shenzhen Processing Trade Enterprises Association, bluntly stated that the U.S. economy remains uncertain. Even with orders from the United States, member companies now have more credibility risks that did not originally exist: “The U.S. officials will also be cheated.” And Liu Yanfang It seems that companies now have more orders, and the more likely reason is that because the number of companies is small, the real situation in the US market has not been reported back. “From the export situation, the higher-priced electronic toys still have a backlog, and they are all low-priced products.” Liu Yanfang’s statement can be partially confirmed in Hong Kong’s trade statistics. In the first eight months of this year, the total value of toys exported to the United States by Hong Kong has just passed the 10 billion mark, a year-on-year decrease of 26.3%. Last year's total exports were 21.7 billion, which was far less than the 28.9 billion in 2008.

Air-conditioning industry collectively chooses to raise prices In the time calculation of the air-conditioning industry, the freezing year begins in the summer of August. For the cold year of 2011, price increases are a common choice. Dong Xiaohua, director of Midea Group Brand Management Department, told the Shenzhen Daily News reporter that in the current Canton Fair, the export price of Midea's air conditioners increased by 5% to 10%. At the same time, Galanz also raised the price of 40% of its export products by 10%.

In fact, price increases have already emerged. Appliance companies in the Canton Fair in April this year, "up one." At the time, Chigo's export quotation was generally raised by at least 10%. Dong Xiaohua said, "In fact, this year, air-conditioning export quotation has been mentioned." Quotes have been mentioned, export data in the 2010 cold year is very beautiful. According to customs statistics, in the first eight months of this year, the export volume of air-conditioning products exceeded 28.77 million units, and the export value reached 6.47 billion US dollars, an increase of 51.32% and 45% year-on-year respectively. According to the industry online data, the export volume of air conditioners reached 37,107,800 units in the 2010 cold year, an increase of 37% year-on-year, recovering the 2009 cold year's losses in increments of over 10 million units. In the cold year of 2008, the export volume of China's air conditioners was 3,786,800. Xiao Youyuan, general manager of Gree Electric Overseas Sales Co., Ltd. disclosed that in the cold year of 2010, Gree's air-conditioning export volume and export volume increased by 87% and 85% respectively, and the export volume exceeded 10% in the 2008 cold year. In the cold year of 2011, Gree's air-conditioner export momentum continues unabated, and it is estimated that the export growth from September to December will exceed 110%. In the US, Brazil, Italy, South Africa and other local markets, the increase of Gree air-conditioning exceeds 100%.

To raise the export quotation, the above-mentioned business people are outspoken: First, a slight increase in some look at the market feedback, the future quote will definitely include expectations of exchange rate rise and other aspects. Dong Xiaohua said frankly that in the price increase of export products, the export quotation of the United States has actually been rising this year due to factors such as the lower US dollar exchange rate, increasing domestic inflationary pressure, and price increases of raw materials. “Because the company’s exports are for profit. There are no statistics on the price increase rate for each product, but each product is different.” He emphasized that this price increase activity is mainly aimed at competitors and changes in the international market. And made. The US quarterly report released at the end of October revealed that although total operating revenue in the United States increased by 60.31% year-on-year in the first three quarters of this year, "as a result of scale growth and rising raw material costs, operating costs increased by 73% over the same period of last year, and the company's overall gross profit margin decreased year-on-year. 6.16 percentage points."

Analysts pointed out that this is undoubtedly testing the competitiveness of Chinese home appliance companies. It must be pointed out, however, that accepting Chinese companies’ product price increases is because overseas customers are well aware of the capabilities and level of the Chinese home appliance industry, especially the Chinese white goods industry. Overseas customers rely heavily on the Chinese home appliance industry. On the one hand, thanks to the improvement of the international economic situation, the demand of major export markets such as Europe, the United States, the Middle East, Southeast Asia, and Africa has grown; on the other hand, the competitiveness of China's air-conditioning products has greatly improved, and export products are in a period of upgrading. A generation of energy-saving and environmental protection products have gradually been recognized by the market. This is considered to be the main reason for the rapid growth in the export of air-conditioning products in China this year. Therefore, almost all the air-conditioning companies interviewed are optimistic about the export situation next year and believe that there is still a certain growth potential in the international market. Most of the companies stated that under the circumstances that the exchange rate and raw material prices do not fluctuate greatly, they can fully absorb the influence of unfavorable factors and maintain an export growth rate of around 20%.

An analyst of the home appliance industry of the Zhongyuan Securities Shanghai branch, who declined to be named, said in an interview with a Shenzhen Business Daily reporter that in the colder year of 2011, the sales volume of the air-conditioning industry was “highly problem-free”, but “the growth rate will slow down significantly.” ". He believes that “although air-conditioning companies face unfavorable factors such as the fluctuations in the exchange rate of the US dollar, the appreciation of the US dollar, and the rising cost of raw materials and labor caused by domestic inflationary pressures, the domestic air-conditioning industry has high concentration ratios, Gree, Midea, and Haier. The total output of big giants exceeds half of the country's total, so they have the ability to raise prices when faced with a series of unfavorable factors at home and abroad."

The analyst pointed out that because China's air-conditioning production system has the most complete industrial chain and high production efficiency, there is no second region in the world that can compete with China in air-conditioning production. The international market is more dependent on Chinese air-conditioning. . “European and American markets, although the uncertainties in the economic upturn have increased, the sales of the European and American air-conditioning markets have recently declined, but according to relevant statistics in September of this year, European and American air conditioning market inventory has been maintained at a relatively low level. Once the US and European markets make up the stocks, they will increase the import volume of Chinese air conditioners. The only uncertainty is that due to the ups and downs of the economic recovery in Europe and the United States, the time for restocking cannot be determined."

Raising the value-added of products is the fundamental way out: "Rational use of financial instruments for hedging risks. Shenzhen enterprises have done quite well because the Hong Kong capital background means that they are more familiar with exchange rate fluctuations earlier. It is also possible to adjust contract management, such as the use of gradient quotations and long-term orders. If it becomes a short-term bill, it can also be agreed that the risk-bearing bottom line will rise by more than 2%, and that the excess will be borne by the importer.” According to Zheng Jianguo, the exchange rate response of Shenzhen-based manufacturing companies is adequate.

However, this is only a tactical response. The strategic response to strengthen innovation capability is not satisfactory, although everyone will say: “The lower the product, the lower the added value, and the worse the anti-risk capability.” The Association of Processing Trade Enterprises In the survey, half of the companies chose to strengthen the brand strategy and enhance the added value of products as the fundamental way to deal with exchange rate fluctuations. Analyze the export quotation of air conditioners and increase the prices of air conditioners. Zhi Gao, director of Zhigao's overseas market management department, believes that “the competition between companies is becoming increasingly fierce, the export prices of products are very low, and profit margins are given to foreign dealers. In addition, ** * Appreciation, rising labor costs, and raw material prices can also encourage companies to actively make self-adjustments, which may not necessarily be a bad thing in the long run.In concrete terms, companies will no longer be tangled up in product prices and instead invest their efforts in product technology. In R&D and innovation, companies are moving from price competition to product and technology competition."

Regarding Galanz's 10% price increase for 40% of its export products at the Canton Fair, Galanz spokesman Lu Yulie said earlier that international customers are only willing to pay higher prices for products that meet the conditions, such as Galanz’s willingness to The 45-day delivery period is shortened to 30 days, and even some 20-day delivery. The reason why this happens is because the overseas economy has not completely recovered and foreign customers prefer to avoid risks by reducing inventory. “Overseas customers are willing to raise prices for those products that have high value-added products in two aspects, novel appliances with new features, and products with fast delivery capabilities.”

The gap is not the only one. Not long ago, the US spent US$57.48 million to acquire a 32.5% stake in Miraco, Egypt, to further expand the African market. Increasing capital output is a positive boost to the appreciation of ***. However, in the survey conducted by the processing trade enterprises in Shenzhen, there was a large area of ​​blankness in answering “whether or not they intend to invest overseas”.

It is indeed unfair to use the same standard for mature and leading industries compared to growing companies, but the difficult transition is still the same path. In Liu Yanfang’s view, the profit at the critical point has shown a positive effect. “This time, there are always members who invite us to participate in the new product launch event. It feels like a catwalk show routinely performed by fashion brands. Although we haven’t asked for a model, it shows that our company is meticulous in running its own brand and studying the domestic market. Trend.” Liu Yanfang said with a smile: “We even plan to apply to the government. Shenzhen Museum of Industry Exhibition Hall can become a fixed toy catwalk in Taiwan.”