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Public company info - Shenzhou International Group Holdings Ltd. , 02313.HK

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Shenzhou International Group Holdings Ltd., 02313.HK - Company Profile
Chairman Ma Jianrong
Share Issued (share) 1,503,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Apparel
Corporate Profile Business Summary: The Group is principally engaged in the manufacture and sale of knitwear products. Performance for the year: Sales for the year ended 31 December 2019 amounted to approximately RMB22,665,272,000, representing an increase of approximately 8.2% when compared with the year of 2018. If excluding the retail business, it represents an increase of approximately 10.1% compared with last year. Profit attributable to owners of the parent for the year ended 31 December 2019 amounted to approximately RMB5,095,206,000, an increase of approximately 12.2%when compared with the year of 2018. If excluding the retail business, it represents an increase of approximately 14.1% compared with last year. Business Review At the moment, the growth of global consumption demand for apparel products slows down and the ever-changing trading market becomes more complicated, thus driving the total production cost of enterprises upward generally. As a result, the industry suffers from the pressure of both insufficient demand and increasing costs. During the year under review, the Group managed to deliver satisfactory growth notwithstanding the adversities. The sales revenue and profit attributable to owners of the parent for 2019 increased by 8.2% and 12.2% respectively when compared with those for 2018. Where the impact of retail business is excluded, the sales revenue and profit attributable to owners of the parent for 2019 increased by 10.1% and 14.1% respectively when compared with those of 2018. The realised earnings per share is RMB3.39. During the year, the Group’s efforts were mainly focused on enhancing its long-term competitiveness of its enterprises, mainly including (1) the expansion and effectiveness of overseas bases and the improvement of efficiency, (2) the further optimisation of resource allocation and energy consumption structure of domestic bases and (3) the accelerating compression and even withdrawal of its retail business. During the year, the Group continued to expand the production scale of its overseas bases. The garment factory newly built in Vietnam commenced operation as scheduled smoothly and the labour headcount increased steadily as a result. The new garment factory is strategically located in the same industrial area as the fabric factory in Vietnam, thereby facilitating the integration of industrial chain, reducing the transportation cost and improving the utilisation rate of raw materials. In Phnom Penh of Cambodia, the construction of a new garment factory commenced in the first half of 2019. The project is well on track and is expected to be completed by the end of 2020 and commence production by stages in 2021. At the end of 2019, the Group commenced construction of another new garment factory in Vietnam, which will be assigned to serve a major client as a dedicated garment production factory. The production of the fabric factory in Vietnam has continued to expand, with its capacity of fabric production accounting for over 45% of the total capacity of the Group, thus ensuring sufficient upstream supply of fabrics for the expansion of overseas garment factories. Along with the expansion of the scale of overseas factories, the operation and management of these factories became mature and the production efficiency also improved significantly, thereby laying a solid foundation for the long-term development of the Group. The Group intends to moderately increase the productivity of fabrics of domestic production bases to a certain extent so as to replace the fabrics imported from current overseas bases, thereby achieving the ultimate goal of attaining a balance between the upstream and downstream productivity of each overseas and domestic bases. This helps to speed up the delivery schedule and lower logistics cost. Accordingly, during the year, the Group arranged for the acquisition of land parcels which was necessary for the production of fabrics at its base located in Ningbo. Given the continuous technology advancement of production equipment in recent years, the water and energy consumption of domestic bases decreased continuously during the year, thus solving the problem arising from the governmental limitation on environment emission index following the increase in productivity of fabrics. Currently, all of our domestic bases are completely using natural gas as basic fuel, thus effectively alleviating the adverse impact on the atmosphere. The Group has been engaged in retail business for many years but was unable to achieve satisfactory results. In order to further focus our management efforts on the apparels manufacturing business and to provide our clients with better services, the Group accelerated the scale-down of our retail business during the year. As at the end of 2019, all of our outlets directly under the retail business were closed. Despite the temporary adverse effect on the operating results for the year arising from the withdrawal from retail business, it is believed that this will be beneficial to improving the long-term competitiveness of the Group’s apparels manufacturing business. Although the Group has withdrawn its retail business, it does not change the Group’s expectation and optimism on the long-term demand of the domestic apparels consumption market. Prospects: The COVID-19 virus has been spreading among a number of countries. Other than imposing a compulsory quarantine to restrict the movement of and interaction between people, it seems that there will not be an effective medical method to stop the epidemic in the foreseeable future. To prevent imported cases and the subsequent spread of COVID-19, the governments of most countries implemented certain specific control measures. The epidemic restricted the movement of and communication between people of different countries, and bringing a blow to cross border co-operation on multinational industrial chains. As a result, the total global trading volume decreased as the consumption demand was constrained. Some sectors were forced to close temporarily or to operate at a level far below their designed capacities, thus seriously affecting the global economy. The supply chain of the global textile and apparel industry was heavily affected by the outbreak of COVID-19. In Mainland China, it was common to witness enterprises suffering from the delayed start of production activities and the lower-than-expected attendance rate of labourers returning to work initially after the Chinese New Year holiday, resulting in delayed delivery of part of orders of some enterprises. Due to the insufficient ancillary facilities for domestic industrial chains, the productivity of certain apparel manufacturing countries in Southeast Asia, for example Bangladesh, was affected by the shortage in supply of raw materials, such as fabric trims from China. Staff members of certain wholly foreign-owned enterprises were subject to restriction on entry to China and as a result management personnel failed to report for duty, thus jeopardising the normal operation of enterprises. Apparel industry is commonly labour intensive and additional costs were incurred to prevent viral spread. Besides, the consumption demand of retail business was decreased by the epidemic, which may bring problems about an under insufficient utilisation of capacity to the textile and apparel industry. As affected by the recent COVID-19 outbreak continuously in Europe and America, global apparel retailing industry experienced a drop in sales in general. We also noted that part of the core clients of the Group has closed their physical shops in certain countries. While the development of the epidemic in those countries is still not certain, it is not practical for us to estimate the effect of the epidemic based on the revenue of the clients of the Group. At present, the utilization rate of the production capacity of the Group is still not significantly affected, however, the effect of the epidemic on our clients may eventually affect us, and as a result, if the situation of the outbreak is not improved, the Group’s production capacity may experience underutilization for a period of time in the future. The industry is operating under significantly increasing and tremendous pressure at the moment. However, we believe that the challenge will not last long. An enterprise’s ability to develop mainly depends on its competitiveness in the industry. Accordingly, the Group will continue to attach great importance to the rational planning of its production bases, the vertical optimisation of its industrial chain, the consistent innovation of products and the adequacy of cash reserve. Despite this difficult period, the Group will pay special attention to the accumulation and enhancement of its enterprises’ competitiveness so as to leverage on business opportunities arising from the latest round of industry integration. The Group will further facilitate the sharing of resources between overseas production bases and domestic bases. Meanwhile, enhance overseas factories’ ability to operate independently. The Group will also continue to optimise the vertically integrated production model of overseas bases, to establish and broaden the category of ancillary facilities of the local supply chain overseas, to reinforce the reserve of talent pool and shift system for Chinese management personnel assigned to overseas countries and to train and attract candidates with localised management and technological expertise. In addition, the Group will facilitate the process of internal data integration, particularly the sharing and optimisation in respect of research, development, innovation, production techniques, business management and data processing in daily operation. The Group believes that the ability in enhancing efficiency and continuing to invest in environmental protection will become the major entry barrier and competitive advantage of the industry in the future. As a result, the Group will make every effort to further improve the usage efficiency of consumption of water and other resources so as to alleviate the adverse impact of production activities on the surrounding environment, to promote clean production throughout the entire production process and to ensure that end consumed products have feature of environmental protection. In the future, the Group will continue to optimise the structure of energy consumption and to increase the ratio of clean energy usage in its production activities, and will increase the usage of clean energy, including solar energy and wind energy, step by step whenever possible. The Group considers our staff members as the most valuable and essential assets, and will sustain to improve their daily living facilities, to optimise their working environment and to establish a competitive compensation and fringe benefit system featuring a highly incentive scheme. The Group is also building several new staff dormitories in its domestic bases, providing better environment standard, living condition and ancillary facilities than the original dormitories. Furthermore, the Group intends to build more high quality staff dormitories and apartments in the future so as to phase out the old dormitories gradually. Ancillary facilities like staff dormitories will also be included in the Group’s new factories in Cambodia in which central air conditioning system will be installed. It is widely believed that a stable, well-trained and competent working team is the most important element of an enterprise featuring high production efficiency and sound product quality. Also, ambitious talents with a proactive attitude are definitely the major key to consistent innovation and management upgrade of an enterprise. Enterprises during the operation may encounter unknown adversities and risks anytime. What we can do is to strengthen our ability in accommodating to changes and to take a proactive role in pursuit for innovation and reformation. Given these abilities, enterprises will be able to maintain their organic growth and withstand adversity. The Group is committed to enhancing its sustainability so as to provide our customers with services of the best quality and to create the highest value for our shareholders.

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