High price rubber test the cost control of tire companies

At the end of July, Fengshen announced the 2011 semi-annual performance report. Data shows that the company achieved a total operating revenue of 5.525 billion yuan, of which the main business - tires operating income reached 5.487 billion yuan, an increase of 31.30%, operating profit rate reached 15.99%. It is worth mentioning that in the first half of the year when operating costs increased by 25.62% year-on-year, the AWACS semi-annual report data was still outstanding, reflecting the strong competitiveness of the company.

As the first tire listed company that released the semi-annual report, the good semi-annual report results of Fengshen Tire also received a positive response from investors. The stock rose for three consecutive days from July 26 to 28, with a cumulative increase of more than 7%.

“In the first half of the year, the domestic natural rubber price is running at a high level. The data reported by Fengshen's semi-annual report is somewhat surprising.” Chen Junzhu, an analyst of China International Futures, said that since last year, domestic tire companies are facing huge cost pressures. Under such conditions, Fengshen The key data of the stocks, such as revenue and profit, still maintained a steady growth. This shows that companies have strong capabilities in cost control.

It is understood that compared with the same period of last year, the domestic natural rubber spot price rose by an average of 53% in the first half of this year. In general, natural rubber raw material costs account for 40% to 50% of the total cost of tire companies. In the first half of this year, the domestic natural rubber spot price was kept running above 30,000 yuan for most of the time. This means that whenever natural rubber is purchased, its cost will be at the first line of 30,000 yuan. Only the increase in raw material prices will make tire company costs. Expenditure is 20%-25% more. So, what are the reasons why Fengshen’s shares maintain high profit growth?

Chen Zhangzhu believes that there is a possibility that, before last year's sharp rise in prices of natural rubber, or during the process, Fengshen Tire purchased a considerable amount of raw material inventory at a relatively low price. This cost advantage is naturally reflected in the good semi-annual report data. .

A tire industry official also told reporters that in the second half of last year, accompanied by a wave of price increase in the tire industry, the cost advantage coupled with the end product price increases, pushing up the business revenue efficiency of Fengshen Tire.

“The company has always attached importance to the management and control of operating costs, especially in the control of raw material costs.” Fengshen shares secretarial secretary Han Faqiang said in an interview with the reporter of Futures Daily that Fengshen has an excellent analytical and procurement team in timing and scale of procurement of raw materials. The grasp on the performance has always been good, making the company's control over raw material costs continue to increase.

He said that in terms of determining the price trend of the raw material market, Fengshen has benefited from the accumulation of his own experience, and on the other hand, he also attached great importance to the role of the futures market in price discovery. Although the company is not currently involved in the domestic natural rubber futures market, it has been communicating with some domestic futures companies in the natural rubber industry trends and price trends, and has enhanced its perception of the company's market trends. In June this year, Aeolus and related companies jointly established a trading company in the Qingdao Free Trade Zone, responsible for the purchase of raw materials for enterprises, and further exerted their advantages in scale and resources.

In addition to enhancing the company's control over costs, Han Faqiang also stated that in recent years, Fengshen Tire has also made active adjustments in the market and product mix. At present, it has formed three sub-markets for complete vehicles, exports, and maintenance. In the case of a weak domestic tire market, the company has increased its sales efforts in terms of export and maintenance, and has also increased the marketing of high-end products.

In the semi-annual report, the reporter also noticed that in the first half of the Fengshen Tire's external exports maintained rapid growth, its domestic operating income increased by only 27.19% year-on-year, while foreign operating income increased by 40.86% year-on-year to 1.794 billion yuan, and foreign exchange earnings continued to be maintained. The first industrial enterprise in Henan Province.

“Increase in foreign export intensity has become a top priority for many tire companies' development strategies.” An industry source told reporters that since the beginning of this year, domestic production and sales of engineering vehicles and passenger vehicles have been regulated by macroeconomic policies. The volume continued to decline. According to statistics, the heavy-duty truck market has changed from a high-speed growth of 59% last year to a negative growth of 7% in the first half of this year, especially in May and June. This is due to the fact that there are numerous domestic production engineering and truck tire companies. There is no doubt that with great pressure. The expansion of overseas market efforts has become a choice for many domestic tire companies. In addition to Fengshen Tire, domestic large tire companies such as Linglong and Double Star also invariably increased their exports. However, this person also reminded that with the increase in the number of companies going out, the competition in overseas markets has become more intense. Domestic tire companies should avoid repeating the mistake of “price wars” to prevent unnecessary overseas trade disputes and disputes.