Textile production volume dips at Weiqiao in H1 2012 (China)

Weiqiao Textile Company Limited, the largest cotton textile producer in China, announced its unaudited consolidated interim results for the six months ended 30 June 2012 (the "Review Period" or the "Period").

During the Period under Review, the textile industry in China was significantly affected by the challenging global macroeconomic situation. Factors such as weak demand in both overseas and domestic markets, the cotton price gap between domestic and overseas markets, and intensified international competition caused a decline in the textile industry in China.

As a result, the whole industry saw a slowdown in production growth and domestic sales, greater downward pressure on exports and declining earnings.

During the Period, exports of China's textile products increased, though at a much lower rate. According to the statistics released by the Administration of China Customs, China's exports of textile products in the first half of 2012 rose by approximately 1.3% as compared with the corresponding period of 2011, to approximately US$46.5 billion.

The growth rate declined by approximately 27.5 percentage points from approximately 28.8% in the corresponding period of 2011.

During the first half of 2012, the Group's production volume of cotton yarn, grey fabric and denim were approximately 206,000 tonnes, 498 million meters and 42 million meters, representing decreases of approximately 37.6%, 14.1% and 16.0%, respectively, over the corresponding period of last year.

The decrease was mainly due to the Group's adjusting its production plans to lower the output with a view to reduce inventory levels on the back of intense competition, caused by weak market demand for textile products and large cotton price gap between domestic and overseas markets.

During the Period, our revenue was approximately RMB7,709 million, representing a decrease of approximately 4.0% from the corresponding period of 2011. Net profit attributable to owners of the parent was approximately RMB54 million, representing a decrease of approximately 90.1% as compared with the corresponding period of 2011. Earnings per share were RMB0.05.

The Group's gross profit margin for the first half of 2012 was approximately 5.4%, 7.3 percentage points lower than that in the corresponding period of 2011, but 3.6 percentage points higher than the 1.8% gross profit margin for the whole year 2011.

The Board of the Company recommended no payment of the interim dividend for the six months ended 30 June 2012.

Commenting on the first half of 2012 interim results performance, Ms. Zhang Hongxia, Chairman of Weiqiao Textile, 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."

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