Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
GOLDEN SHIELD
HKEx Stock Code : 02123 
 
Corporate Profile
Based in Shaanxi Province of the PRC, the Group is principally engaged in the production and sale of cotton yarn and grey fabric in the PRC.

Business Review - For the year ended December 31, 2012

The Group is one of the key cotton textile suppliers in north-western China offering various types of cotton yarn and grey fabrics to customers spread across 12 provinces and municipalities in the southern and eastern regions of PRC. By business segments, the cotton yarn business, grey fabrics business, and sales of lint cotton accounted for approximately 70.4%, 8.7% and 20.9% respectively of the Group's total turnover. For the year ended 31 December 2012, the total sales volume of the Group's cotton yarns and grey fabric were 19,780 tonnes and 13,613 kilometers respectively.

Cotton yarn business

In 2012, turnover of the cotton yarn business decreased by approximately 23.8% to approximately RMB531.5 million (2011: RMB697.4 million), accounting for approximately 70.4% (2011: 70.4%) of the Group's total turnover.

All the Group's cotton yarn products are pure cotton yarn products and can be generally classified into carded yarns and combed yarns. In general, the selling price of cotton yarns increase with the fineness and combed yarns have a higher selling prices and stable profit margin than carded yarns, as combed yarns are more even, compact and smoother.

As the customers demand have shifted to high quality cotton yarn such as combed cotton yarn products, the decline in the cotton yarn business was mainly due to decrease in sales of carded cotton yarn products. To enhance the product mix and sustain the profit margin, the Group has been focusing its business in combed cotton yarn business which is less affected by the market.

Grey fabric business

The Group has been focusing on shifting its product mix by reducing the grey fabric output. In 2012, turnover of the grey fabric business amounted to RMB65.5 million, representing a decrease of 50% when compare to 2011. The decrease of the grey fabric business was mainly due to the decrease in average selling price and the market demand for the products.

The Group will continue to provide various grey fabric models but will adjust the proportion of its business according to the changes of market demands.

Lint cotton trading business

The revenue from lint cotton trading business decreased 2.8% to approximately RMB158 million when compared to 2011. The decrease in revenue from lint cotton trading business is mainly due to the decrease in average selling price while the demand for the products still remain stable for the year.

Business Outlook - For the year ended December 31, 2012

The Group will continue to streamline its operation by focusing on the cotton yarn business, particular on the combed yarn products. With the customers demand have been shifted to high quality products, it expects this is the right strategy for the Group as it can meet with domestic consumption trend.

The Group was informed by local government that the Jinghe New Town where the Yongle Production Plant locates is undergoing town planning process. As the management is unable to evaluate the influence on the Yongle Production Plant's expansion plan because of this town planning process, the Group will postpone the construction work of the expansion plan until the finalization of the said town planning process.

Operationally, with the completion of the Acquisition, the Directors expect the Group can enhance the competitiveness immediately by increase in proportion of Group's combed cotton yarn product output in the long run. Upon completion, we expect it can further enhance the economic benefit to the Group as we will have full autonomy to utilize our production resources. We believe the Yinhe Production Plant will help to enhance the Group's leadership in the industry in northwestern region in the PRC, increase our market share with better product mix and lead the Group's business to new heights.

Source: Golden Shield Hldgs (02123) Annual Results Announcement
Chairman Chen Binghui Issued Capital (shares) 942M
Par Value HKD 0.1 Market Capitalisation (HKD) 259M
 
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