Apparel / Textiles & Accessories

Vietnam's expanding epidemic has failed to stop Chinese companies from investing in Vietnam.

On the evening of July 5th, Blum Oriental (601339), one of the world’s huge mélange yarn manufacturing companies, released a plan for fixed growth. The company plans to raise capital of no more than 1 billion yuan from no more than 35 specific investors for Blum. (Vietnam) Expanded the 390,000-spindle yarn project with a total investment of 250 million US dollars.

Information: A corner of a large workshop with 100,000 spindles in B-A area of Blum (Vietnam) B

Blum Oriental stated that Vietnam is the only country in the “Belt and Road” construction that is connected to my country by land and sea, and has significant geographic advantages. As one of the important members of ASEAN, it enjoys various trade policy preferences inside and outside ASEAN, has signed free trade agreements with Japan, South Korea, the European Union and other countries and regions, and has issued a number of preferential policies for attracting foreign investment. It has good export-oriented economic characteristics. Attracting brand companies to transfer orders to Vietnam, coupled with its relatively low labor costs, for labor-intensive companies, the cost advantage is prominent, and in recent years it has become one of the important destinations for overseas investment by domestic companies. This Vietnam project can realize the further expansion of the company's overseas production capacity based on many advantages of the Vietnam region, which has good prospects.

Blum Oriental said that with the continuous improvement of the industry's technical level and environmental protection standards, the mélange yarn has been widely used in the apparel field, and the demand for mélange yarn at home and abroad is increasing. In recent years, the company's production, sales, and orders have been rising rapidly year by year, and it has developed into one of the world's leading manufacturers and suppliers of colored spinning yarns. The company has achieved a certain scale of production capacity in Vietnam. Over the years, it has accumulated rich experience and resources in the industry by virtue of its continuous innovation in technical strength and rapid delivery capabilities. The company has continuously strengthened cooperation with companies in Vietnam. The core competitiveness of Vietnam is gradually becoming more prominent. The Vietnam project will help the company further release its production capacity, improve its order-taking capacity, and better meet the market's demand for the company's yarn products.

"Made in China 2025" and the strategy of a manufacturing powerhouse have put forward new requirements for promoting my country's textile manufacturing to mid-to-high-end and accelerating the high-quality development of the textile industry. In the future, with the rapid development of high-quality textiles in the textile industry, the color textile market will have Huge room for improvement." Blum Oriental thinks.

Blum Oriental also recognizes the risk of the impact of the "new coronavirus" epidemic. The company revealed that after the third quarter of 2020, benefiting from the complete domestic supply chain and good domestic control of the epidemic, the domestic textile industry has generally seen a trend of backflow of orders. The “new crown pneumonia” epidemic has exacerbated the uncertainty of the company's daily operations. At present, the overseas epidemic has not been effectively controlled, and global vaccination will take time. The global shipping capacity has not yet recovered, which has had a significant negative impact on the company's overseas procurement and overseas sales business. Overseas sales accounted for 60.72% of the company's main business income in 2020, and 60% of the company's production capacity is in Vietnam. At present, the cross-border flow of personnel has not been fully liberalized, and there are still adverse effects on the company's export business, the daily management of overseas subsidiaries, and the flow of personnel.

Related reports:

Blum Oriental: Net profit in the first half of the year is expected to increase by more than 280%. Vietnam subsidiary will increase production capacity by 10% within the month

The Financial Association (Hangzhou, reporter Wang Bin) reported that Blum Oriental (601339.SH) exceeded expectations in the first half of this year due to factors such as increased capacity utilization, increased orders, and increased profits from its main business. On the evening of July 1, Blum Oriental issued a performance forecast stating that in the first half of 2021, the company is expected to achieve a net profit of 518 million yuan to 586 million yuan, an increase of 280%-330% year-on-year, far exceeding last year's net profit of 379 million yuan.

On the morning of July 2, a reporter from the Financial Associated Press learned from Blum Oriental that the company's Vietnam production base will increase its production capacity by 10% at the end of this month. It is understood that the current production capacity of Blum Oriental Vietnam accounts for more than 60% of the company's production capacity, and net profit contributes more than 50%. Relevant persons in the company told the Cailian News that the company's orders are continuing to grow, with personalized products in full production and sales in a single season, and orders for standardized products throughout the year. Regarding the company's performance outlook for the second half of the year, the aforementioned relevant persons expressed optimism.

Tang Shuangshuang, an analyst in the textile and apparel industry of West China Securities, believes that Blum Oriental’s performance has exceeded expectations mainly due to three reasons: First, the lag effect caused by the company’s price increase. The contribution after the March price increase is mainly reflected in the second quarter of 2021; Second, the company's high-margin color spinning orders accounted for further increase; third, the company's capacity utilization rate in the second quarter further increased.

Earlier, an insider of Blum Oriental stated in an interview with the Financial Associated Press that the company had undertaken a wave of backflow orders in the second half of last year. Since the fourth quarter of last year, the company’s order situation has been very good and it is close to full production. The situation was better in the same period of 2019 before the epidemic. A reporter from the Financial Associated Press learned that the company's Indian orders are not returning much, and most of the company's customers are international well-known clothing brands.

Affected by the intensification of the epidemic in India and the increase in global commodity prices, cotton prices have rebounded to 16,000 yuan/ton since April, and the current cotton price fluctuates between 15,500 yuan/ton and 16,000 yuan/ton. In contrast, the prices of Blum Oriental products have risen.

According to customs statistics, from January to May this year, the country’s textile and apparel exports amounted to US$112.69 billion, a year-on-year increase of 17.3%. Among them, textile exports were US$56.08 billion, an increase of 16.1% over the same period in 2019. Regarding the impact of the exchange rate rise, the above-mentioned company's relevant person said that the company currently imports raw materials from India, the United States, Brazil and other cotton-producing countries as offset, so the impact is not significant.

Blum Oriental's main business is the cotton spinning industry, accounting for 95.41% of revenue. The quarterly report shows that during the reporting period, the company achieved revenue of approximately 1.874 billion yuan, a year-on-year increase of 37.50%; net profit was approximately 223 million yuan, a year-on-year increase of 212.64%. In a single quarter, the company's net profit attributable to the parent in the second quarter is expected to be between 295 million yuan and 363 million yuan, a year-on-year increase of 354%-459%, a further increase in growth compared to the first quarter.

According to public information, the First Textile Network learned that as one of the top 100 competitive cotton textile enterprises in China, Blum Oriental’s main business is the R&D, production and sales of colored spinning yarns, with an annual production of more than 200,000 tons of yarns. The holding subsidiaries are located in Zhejiang, Jiangsu, Shandong, Shenzhen, Hong Kong, Macau and other places, and in the large-scale production base in Vietnam’s Tay Ninh province. In 2020, Blum Oriental’s Vietnam Blum Phase I and Phase II will have a total production capacity of 1 million spindles. Completed and put into production, accounting for 60% of the company's total production capacity.

The financial report shows that in 2020, Blum Oriental achieved operating income of 6.135 billion yuan, a slight decrease of 1.40% from the same period last year, and realized net profit of 366 million yuan, an increase of 22.92% from the same period last year. Among them, Vietnam Blum completed operating income of 3.678 billion yuan, an increase of 14.11% over the same period last year; realized a net profit of 229 million yuan, an increase of 8.04% over the same period last year.

In the first quarter of 2021, Blum Oriental achieved operating income of 1.874 billion yuan, a year-on-year increase of 37.50%; net profit attributable to shareholders of listed companies was 223 million yuan, a year-on-year increase of 212.64%.