Winter in the flooring industry in China is still not far
Despite a slight recovery in the property market, the downstream flooring industry in China continues to face significant challenges. Weak sales, rising operational costs, and fierce competition have left many companies struggling. On January 18, China Flooring Holdings Co., Ltd. issued a profit warning, signaling that the industry's cold season is far from over.
On Friday, January 18, the company announced that its 2012 earnings would be sharply lower than the previous year, mainly due to ongoing weakness in the real estate sector, which has led to a major drop in turnover, as well as increased operating expenses. This came after a 90% plunge in net profits during the first half of the year, further highlighting the deepening crisis in the flooring sector.
In August 2012, the company’s interim report revealed a 27% year-on-year decline in revenue, totaling RMB 506 million, due to weak demand and a challenging market environment. Distribution and administrative costs also rose significantly, with total costs increasing by 29%, pushing the gross margin down to 32%. Net profit fell by an alarming 96.3% to just 3.523 million yuan. Following the announcement, the company's stock price dropped sharply, prompting the firm to spend nearly HKD 12 million in the following month to repurchase shares on six separate occasions.
China Flooring was listed on the Hong Kong Stock Exchange’s Main Board on May 26, 2011, at an issue price of HKD 2.95 per share. As the owner of the "Natural Flooring" brand, it once attracted considerable investor interest. However, as domestic property regulations tightened, the flooring industry faced a prolonged downturn, with sales plummeting. The company's stock, which had reached a high of HKD 3.53 in July 2011, has since fallen by nearly 54%, and its market value has shrunk significantly.
The impact of macroeconomic policies on the real estate sector and its supporting industries remains evident. According to data released by the China Building Materials Circulation Association on January 14, the annual sales volume of building materials for large enterprises in 2012 dropped by 2.46% year-on-year to 1.2467 trillion yuan. Analysts like Ye Shangzhi, chief strategist at Shanghai Securities, believe that real estate regulations in 2013 will likely remain neutral, leading to a more stable and moderate environment for the flooring industry.
Ye Shangzhi pointed out that one of the biggest challenges for the flooring sector is the pressure from rising costs. From store rent and labor wages to raw material prices, these factors are squeezing corporate profits. Reports indicate that performance across the entire flooring industry, including China Flooring, remained largely disappointing in the first three quarters of 2012, reflecting ongoing difficulties in the sector.high accuracy laser distance sensor, laser sensor for distance measure, phase distance measure sensor
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