With the slowdown of macroeconomic growth and the impact of high costs, the pressure faced by the printing industry is rapidly transmitted to the upstream. On August 12, 2008, Beiren Printing published a semi-annual report showing that as of June, it recorded revenue of approximately RMB 390 million. According to the Chinese Accounting Standards and Hong Kong Accounting Standards, its net loss for the period amounted to RMB 22.8 million or RMB 20.98 million. .
Shanghai Electric, which is in line with Beiren Printing's two giants in the domestic printing industry, also admitted that the industry is facing overall challenges. “Judged from past experience, the recession of the printer industry will last for two to three years. Therefore, I think the situation of the printing industry in the current and next two years is not optimistic.†Yang Changcai, General Manager of Supply and Marketing Branch of Shanghai Electric Group Printing and Packaging Machinery Co., Ltd. Say.
Downstream or divestment
As early as the half-year performance warning issued on July 3, the Beiren Printing Machine stated that since the beginning of this year, due to a variety of factors, various costs have increased, and in the first half of the year, losses will have been caused due to the adverse effects of supply and demand at both ends.
The semi-annual report released on August 12 showed that the operating profit, total profit, and net profit of Beiren Printing Machinery were down by 442%, 335%, and 303% year-on-year, respectively, and they ultimately recorded a loss of RMB 0.05 per share.
The Beiren Printing Press further explained that the global economic turmoil triggered by the US subprime mortgage crisis and the prices of primary commodities such as oil and grain have skyrocketed, leading to global inflation. With domestic macroeconomic control, the economic growth rate began to fall, coupled with unfavorable factors such as the appreciation of the renminbi and export tax rebates, rising prices of raw materials, artificial rise, and other downstream factors, profits of downstream printing companies dropped sharply, and even turned production, divestment or bankruptcy.
It is corroborated that the printing industry listed companies have announced half-yearly reports that are not satisfactory. Among them, Jilong Industrial's semi-annual report showed that its net profit during the period was 3.07 million yuan, down 24.98% year-on-year. On the 12th, Hongbo’s shares announced its performance. The ROE continued to decline from 6.52% in the first quarter to the half-yearly report. 4.66%, while in 2007 and 2006, the company's ROE was as high as 31% and 41% respectively.
As for the divestment phenomenon, Yang Changcai confirmed: “The collapse and divestment of printing companies are particularly evident in South China. A large number of foreign capital and joint venture companies have chosen to shut down their factories in the region and move to lower-cost Southeast Asia.â€
According to Guo Zhenju, an analyst with Essence Securities, the total private and foreign-invested companies in Guangdong accounted for 76% of the total, and only 20% of the state-owned and collective enterprises accounted. The changes in the number of foreign investment and joint venture companies have a direct impact on the largest single market in the Pearl River Delta region, which accounts for more than one-third of the national output value of the printing industry.
Yang Changcai also revealed that due to the appreciation of the renminbi, the export business of the printer industry also suffered a cold wave. “Our export profits have declined significantly,†and Shanghai Electric’s printing equipment exports accounted for more than 60% of the total value of domestic printing equipment exports. As for the Beiren Printing Machine, its semi-annual report also showed that the proportion of decline in foreign business (-33%) was higher than the decline in domestic business (-28%).
North market or rescue market
In the face of a series of industry shocks, Yang Changcai noticed that North China had higher performance than the country in equipment sales this year.
“Sales in North China have risen slightly, and the Northeast region is even more worthy of attention because there has been a large amount of investment in this area since the beginning of this year. This has led the company to adjust its sales strategy and hopes to attack the North China market in the second half of the year.†It said that since the beginning of this year, the growth rate of the printing industry in the Northeast has reached 30%, which is nearly 10% higher than the compound annual growth rate of China's packaging printing industry in 2005-2007, and the latter is 21%.
According to data provided by Guo Zhenju, loss-making companies account for between 10% and 20% in the most mature East China and South China markets in the packaging and printing industry. In the northeast and north China markets, loss-making companies account for as much as 25%-30%. In addition, from the perspective of the number of printing companies that have reached a certain scale or above, Guo Zhenju pointed out that the number of enterprises in North China and Northeast China is much smaller than those in East China and South China. If Yang Changcai's industry consolidation will drive the demand for high-end printers, Northeast and North China are showing signs of upgrading.
On the other hand, printing giants also tied their hopes to the revision of textbooks that were launched along the way. Yang Changcai said that as the reform of textbooks has greatly stimulated the printing market for books and periodicals, he expects this segment to grow to a certain extent next year.
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