Xingda International's Business Performance Plunges in 2015

Xingda International Holdings got listed in Hong Kong stock market in 2006 and its main businesses are production and sales of radial steel cord, bead wire and other steel wires.

Located in Jiangsu province, the company owns Jiangsu Xingda Steel Cord, Shandong Xingda Steel Cord, and Xinghua Xingda Thermal Power.

Plunge in Gross Profit

Xingda International's business revenue dropped 15.3% year on year in 2015 to 4.74 billion yuan, its gross profit plunged 33.2% to 850 million yuan, and the gross profit margin was 17.9%.

The company's revenue from radial steel cord decreased 15.5% last year to 4.34 billion yuan, accounting for 91% (92% in 2014) of its total revenue, and the sales volume was 501,000 tons, down 2.5%.

Its revenue from steel cords for truck and bus radial tires dropped 22.2% to 2.67 billion yuan, accounting for 56% (61% in 2014) of its total revenue, and the sales volume was 304,000 tons, down 9.3%.

That from steel cords for passenger car radial tires declined 1.9% and accounted for 35% (31% in 2014) of the total, and the sale volume increased 10.4% to 197,000 tons.

In addition, the company's revenue from bead wire and other steel wires fell 13.8% and accounted for 9% (8% in 2014) of total revenue, and the sales volume climbed 1.3% to 79,700 tons.

Proportion of Exports Grows

With regard to different markets, Xingda International's sales volume in the Chinese market was 385,100 tons, down 7% year on year, and accounted for 76.9% (80.6% in 2014) of the total sales volume in 2015; and the sales revenue tumbled 20.8% to 3.54 billion yuan, accounting for 74.7% of the total.

The company's overseas sales volume was 116,000 tons in 2015, up 16.5% and accounting for 23.1% of the total (19.4% in 2014).

The sales income fromIndiarose 9.2% to 229 million yuan, accounting for 4.8% of Xingda International's total sales; that fromRepublicofKoreadeclined 1.1% to 214 million yuan, down 4.5%;U.S.market, up 0.7% to 172 million yuan, 3.6%;Germany, down 0.9% to 85 million yuan, 1.8%; and other regions, up 11.6%, 10.5%.

Decline in Demand for Trucks

From the second half of 2011, steel cord industry entered into a period of overcapacity, Xingda International and its counterpart Bekaert together took up 60% share in the Chinese market.

As the capital requirement for market access is high, some large steel companies also stepped in the market.

Some participants were eliminated from the market since 2014 after price war. The average price for steel cord has been declining over the past few years, the compound growth rate for the past four years was -9.4%, and the price dropped 13.4% in 2015.

As raw material prices started to grow, gross profit margin was under pressure, manufacturers raised product prices in May.

Xingda attributed the plunge in business revenue to gloom logistics and fewer demand for logistics trucks, the demand for steel cords for radial tires also dropped.

Last year, the government subsidized automobiles with emission below1.6L, which boosted the sales of passenger cars, but increased demand failed to compensate the negative impact resulting from the decline for trucks.