Chinese cotton textiles producer Weiqiao Textile has booked a significant decline in first-half net profit just two months after it issued a profit warning.
Net profit plummeted 90.1% to CNY54m (US$8.5m) over the six months ended 30 June. The company said factors such as weak demand at home and abroad, the cotton price gap between domestic and overseas markets, as well as international competition contributed to the decline.
Revenue was down 4% to CNY7.71bn, while gross profit margin declined 7.3 percentage points to 5.4%.
Sales of cotton yarn increased 3.5% to CNY3.69bn, while sales of grey cotton declined 9.4% to CNY3.56bn and denim sales fell 12% to CNY453m.
Weiqiao Textile’s chairman Zhang Hongxia said: “During the period, cotton prices in the domestic market remained at a low level while declining sharply in overseas markets, making overseas cotton much cheaper than domestic cotton, which led to greater competition pressure on the domestic textile industry. Therefore, it was difficult to lift the prices of textile products, which significantly affected the group’s overall profitability.”
Hongxia added: “Looking ahead, we expect the global economy to continue to pose challenges, and this will likely cause demand from international markets to remain weak.”