Weiqiao Textile Company Limited, the largest cotton textile producer in PR China, has announced a 34% increase in first-half turnover and a 27.3% increase in net profit.
Sales growth came from the domestic market, where sales increased by 76% to RMB 6.136 billion, accounting for two thirds of the company's total sales of RMB 9.264 billion (US$1.2 billion). Sales to East Asia and other regions fell by around 20%.
Ms. Zhang Hongxia, newly-appointed chairman of Weiqiao Textile, said: "We aggressively expanded production scale and enhanced our sales momentum. Furthermore, we strongly focused on our domestic market and continued to upgrade equipment. As a result, we achieved significant and stable growth in both turnover and net profit."
Net profit for the half-year increased to RMB 601 million but gross margins declined, mainly due to keen competition in the cotton yarn market. This resulted in a dramatic decrease in gross profit of cotton yarn and an increase in gross profit of grey fabric.
Weiqiao produced 752 million metres of grey fabric in the first six months of 2006. Cotton yarn output was 407,000 tons, and denim out put 81 million metres.
Sales of cotton yarn increased by 40% to RMB 3.8bn. but gross margins were halved to 12%, and gross profit fell by 32% to RMB 459M. In contrast, sales of grey fabric increased by 36% to RMB 4.9bn., margins grew to 17.8% from 10.6%, and gross profit more than doubled to almost RMB 877M. from RMB 383M.
Both sales and gross profit in the company's denim operations decreased. Sales fell by 8% to RMB 474M. and gross profit to RMB 95.8M., down 30%.
Whilst both selling, distribution and administrative costs feel, the group's financial costs increased substantially, up by 71.4% to were RMB 329 million, mainly due to an increase in bank loans and higher interest rates.
Ms. Zhang is optimistic On the Group's prospects and those of the industry, chairman, Ms. Zhang, is optimistic. She commented, "2006 is the first year of the "The Eleventh Five Year Plan" and the growth of China's economy growth will be driven more by consumption than by investment. As a result, the textile industry will rely less on exports and more on growth in domestic demand. As the domestic market grows in importance, operating risks in the textile industry will diminish. As the leading cotton textile manufacturer in China, Weiqiao Textile will execute its business development strategy while adapting to these trends. We are determined to satisfy our customers' requirements for quality products by upgrading production technology and through efficiency enhancements."
