() The operating comments of the Board of Directors in 2023 are as follows:
I. Discussion and analysis of business conditions
2023 is an important year for Huasheng to focus on the main business of hemp spinning manufacturing and realize transformation and development. Guided by the three-year action of reform and development, the company unites and leads all cadres and workers to focus on the main business, continuously improve management, pay close attention to technology research and development, comprehensively deepen reform, strengthen brand output, turn losses into profits, and make a good start in focusing on the development of linen main business.
1. The main business development improves quality and efficiency. In 2023, the company formulated a three-year action plan for reform and development, determined the development direction of extricating itself from difficulties, and formed a good situation for the development of its main business. The annual operating income was 581,157,100 yuan, and the net profit attributable to listed companies was 21,023,100 yuan, turning losses into profits.
2. The effectiveness of the reform has gradually emerged. After completing the withdrawal of Hunan Huiyi, the main business development was further focused. Adjust the organizational structure of the headquarters, set up a research and development design center and a marketing planning center, and coordinate the company’s system product research and development, brand building and product marketing. Revise the salary management and performance appraisal methods of this department, and link the employee’s salary with the company’s benefits and the performance appraisal results, breaking the "big pot". The subsidiary introduces professional managers to promote the exchange of middle-level cadres between the headquarters and subsidiaries.
3. The industrial layout has been steadily advanced. Participate in Dazhou, Sichuan, and complete industrial and commercial changes and the stationing of technical and management personnel; Signed an agreement with China Hemp Institute on the co-construction of provenance base, the research on hemp spinning materials technology and the establishment of hemp inspection and testing center laboratory, and carried out technical research around hemp.
4. Brand building continued to strengthen. The first is to reshape the brand image. The short video of "Bamboo in Huasheng, New Inheritance of Craftsman" won the first prize in the video project of the 11th National Brand Story Competition (Changsha Division), and "Huasheng-Natural Family" was awarded as a well-known trademark brand in Hunan Province. The second is to strengthen brand output. The company deepened its cooperation with the Institute of Hemp Science of the Academy of Agricultural Sciences, and jointly developed new products containing hemp, such as shirts and briefcases. The briefcases containing hemp were purchased twice in hunan college of finance and economics. The third is innovative brand marketing. Build a WeChat applet mall, and gradually complete the products of Tik Tok and Taobao Mall. The strategic cooperation with Xiaoying Group will deepen cooperation in the fields of film derivative development, clothing customization and brand promotion.
5. Innovations are constantly emerging. In the aspect of cultivating innovative subjects, the qualification of "China Spinning Union Ramie Product Development Base" was collected under the name of Huasheng Co., Ltd. Cedar and Clothing Company completed the re-evaluation of high-tech enterprises and added a new high-tech enterprise in Textile Company. In terms of standard formulation, he participated in the formulation of linen international standards and ramie national standards, and led or participated in the formulation of 22 standards at all levels. In terms of product patents, clothing companies added 8 utility model patents and textile technology added 4 new patents. In terms of honors, "Innovative R&D and Industrialization of Antibacterial Multifunctional Hemp Knitted Products" was awarded as a typical case of new mode and new format of textile industry in Hunan Province; Won the first prize of outstanding fabrics in China printing and dyeing industry in 2023, the second prize of the 4th Quality Innovation Competition in Hunan Province, and the finalist award of China popular fabrics.
6. Asset disposal was vigorously promoted. The subsidiaries Dongma and Cedar increased their efforts to clean up the inventory, achieving sales income of 35.02 million yuan and the company’s idle equipment disposal profit of 4.07 million yuan.
7. Safety, stability and overall controllability. Organize study and watch more than 20 safety warning education films, 36 training warning education and 16 emergency drills; Investment in safety and environmental protection is 6,593,800 yuan to ensure that the discharge standards are met in strict accordance with national environmental protection requirements; Focus on key areas, touch out 216 potential safety hazards, and the completion rate of rectification is 100%, so as to ensure that the hidden dangers in stock are cleared regularly. The overall safety production situation of the company is good, and all kinds of safety and environmental protection indicators are controlled in place.
8. The integration of party and industry has achieved remarkable results. Focusing on the difficulties in system reform and production and operation, the company has formulated 16 secretary-joint projects, 4 "unveiling the list" projects, and 14 secretary-joint projects have been successfully completed, handling 38 practical matters for the workers and the masses, benefiting more than 400 people.
Ii. the industry in which the company is located during the reporting period.
1. Development of textile industry
The company is an enterprise specializing in the production of hemp textiles, which belongs to an important branch of the textile industry and an important part of China’s traditional manufacturing industry. In 2023, China’s textile and garment exports showed a slight decline, but in terms of relative proportion, the proportion of China’s textile and garment exports in the global textile and garment exports has continuously increased since 2010, and has remained at around 33% in recent years, and its position in the global market has not declined. According to the data of the National Bureau of Statistics, the total profit of the textile industry increased by 7.2% in 2023. In 2023, the industrial added value of textile enterprises above designated size decreased by 1.2% year-on-year, and the operating income was 4,700.9 billion yuan, down by 0.8% year-on-year; The total profit was 180.2 billion yuan, a year-on-year increase of 7.2%. The output of yarn, cloth and clothing of enterprises above designated size decreased by 2.2%, 4.8% and 8.7% respectively. The benefits of most links in the industrial chain have improved significantly compared with the previous year, and the operating income of chemical fiber, wool textile, silk, filament weaving, printing and dyeing industries has achieved positive growth year-on-year; The total profit of chemical fiber, silk, cotton textile, wool textile, hemp textile and textile machinery increased by more than 10% year-on-year.
2. The development of linen industry
Compared with other textile industries, hemp textiles have unique product characteristics, small overall scale, high industrial concentration and strong enterprise innovation, and still have certain industrial competitive advantages. In 2023, China’s hemp textile industry overcame difficulties such as high fluctuation of raw materials and rising labor costs, showed resilience and vitality, advanced in recovery and stabilized under pressure, and achieved good results, becoming one of the highlights of the textile industry. However, the industry is still facing severe situations such as insufficient demand and market fluctuation, especially the flax industry, which accounts for the largest proportion, is facing challenges such as shortage of raw materials, skyrocketing prices and unstable quality. In recent years, hemp textile industry has developed rapidly. Under the complicated external economic environment, the prices of ramie raw materials, yarns and fabrics will be relatively stable in 2023, and there will be no shortage of raw materials.
3. Development of printing and dyeing industry
In 2023, due to factors such as insufficient market demand and intensified market competition, the operating efficiency of printing and dyeing enterprises was obviously under pressure. However, with the gradual recovery of the domestic demand market and the active expansion of the international market, the efficiency level of the printing and dyeing industry improved steadily. According to the data of the National Bureau of Statistics, from January to December 2023, the output of printed and dyed fabrics of enterprises above designated size in the printing and dyeing industry was 55.882 billion meters, up by 1.30% year-on-year; Operating income was 298.615 billion yuan, a year-on-year increase of 1.44%; The total profit was 13.915 billion yuan, a year-on-year increase of 9.26%. The growth rate of operating income and total profit turned from negative to positive, the profit rate of sales steadily increased, the operating efficiency of enterprises continued to improve, and the economic operation of printing and dyeing industry showed a sustained recovery trend.
4. Development of textile and garment export industry
In 2023, the global economy is in a downward cycle, and the global trade is "de-globalized" and fragmented. China’s textile and garment export enterprises are faced with the dual pressures of order reduction and order transfer. Facing the challenge, the central and local governments at all levels have continuously introduced and implemented the policy of "stabilizing foreign trade". Although the annual textile and garment trade volume has decreased compared with the previous year, it has still achieved good results, with exports reaching US$ 293.6 billion, down 8.1% from the previous year. Among them, it stopped falling and rebounded in December, with exports reaching US$ 25.3 billion, up 2.6% year-on-year, and resumed positive growth in a single month.
5. Development of clothing retail industry
In 2023, China’s economy as a whole showed a trend of low, high and stable, with GDP increasing by 5.2% year-on-year. The textile and garment industry is active, and the retail sales have achieved double-digit growth. The retail sales of clothing, shoes, hats, needles and textiles in the whole year reached 1.4 trillion yuan, up 12.9% year-on-year. Online retail sales also maintained a strong growth trend, and online retail sales of physical goods increased by 8.4% year-on-year. Residents’ consumption expenditure increased steadily, and the per capita clothing consumption expenditure increased by 8.4%. Because the newly published laws, administrative regulations, departmental rules and industrial policies have a significant positive impact on the industry. Hunan Provincial Department of Industry and Information Technology and other 9 departments and bureaus issued "Implementation Opinions on Promoting the High-quality Development of Textile and Apparel Industry", Hunan Provincial Department of Industry and Information Technology issued "Measures for Cultivating Key Brands of Textile and Apparel Industry in Hunan Province", and the strengthening of the support and cultivation of Huxiang brand clothing by the provincial party committee and government will promote our company to continuously improve the pace of high-quality development of textile and apparel brands.
Iii. Business of the Company during the reporting period
(I) Main business of the company
During the reporting period, the company’s main business model is the integration of research and development, design, raw material procurement, spinning, weaving, printing and dyeing, manufacturing and sales, and has formed a complete industrial chain covering spinning, weaving, printing and dyeing, clothing and home textile manufacturing. The company has continuously increased its investment in research and development of hemp products, mainly including ramie, flax, hemp yarn, fabrics and clothing, professional clothing containing hemp, and so on.
(II) Main products of the company
Step 1: Fabric
The company’s fabric is mainly ramie, which is a unique ramie resource in China, and is called "China Grass". China is the main ramie producer in the world, and its ramie output accounts for more than 90% of the world’s total output. Ramie fiber belongs to natural green ecological fiber, which has excellent properties such as moisture absorption, air permeability, bacteriostasis, mildew resistance, ultraviolet resistance and static electricity. The planting process of hemp crops has green ecological characteristics. Hemp fiber is regarded as a symbol of high grade and high quality in developed countries and regions. Ramie textiles are breathable, cool, antibacterial and antiseptic, and are ideal high-grade fabrics. With the deepening understanding of hemp fiber, the domestic market potential of hemp spinning products is huge. The company will continue to innovate and develop new fabrics, adapt to market changes, further optimize the whole industrial chain, and vigorously expand the consumption market space of hemp textiles. At present, the company’s main products are pure hemp and hemp blended yarns (including ramie, flax and hemp) and hemp fabrics.
Step 2 dress
Based on its own linen fabrics, the company has developed its own brands and ODM/OEM business together. It owns domestic clothing brands such as Huasheng Nature-Family, overseas e-commerce brands such as IseBayLinens and ROSS&FRECKLE. In the future, the company will improve its own brand matrix and create multi-brand differentiated development.
Iv. analysis of core competitiveness during the reporting period
1. Brand advantage
The company owns well-known brands in textile and garment industry such as Cedar, Dongting, Jinshuang and Huasheng-Natural Family. Among them, "Cedar" is a well-known trademark in China, "DT ramie yarn" is a famous export brand, and "Jinshuang", "Cedar" and "Dongting" are all rated as famous products in Hunan Province in 2009. Jinshuang is a famous export brand in Hunan Province, Dongting is a well-known brand of China linen, and Huasheng-Natural Family is one of the top ten influential brands in China linen textile industry and a well-known trademark brand in Hunan Province.
2. Technical advantages
The international standard "Testing Method of Textile-flax Fiber Components" (standard number: ISO5773:2023), which the company participated in, was issued by the international organization ISO in April 2023. There are 43 authorized patents, including 10 invention patents and 33 utility model patents.
3. Scientific research and innovation
The company now has 5 high-tech enterprises. Among them, 3 subsidiaries were identified as specialized and new SMEs in Hunan Province. The company’s scientific and technological innovation project "Innovative R&D and Industrialization of Antibacterial Multifunctional Hemp Knitting Products" won the title of "the first batch of typical cases of new mode and new format of textile industry in Hunan Province" by Hunan Provincial Department of Industry and Information Technology. Textile science and technology won the third prize of Hunan Innovation and Entrepreneurship Competition "Energy-saving and Environmental Protection Growth Group". By optimizing the energy-saving process route of linen textile printing and dyeing, the quality of linen fabric was improved, while the consumption of water, electricity and chemical raw materials in the processing process was reduced, and energy conservation, emission reduction and cost reduction were realized. The "shine on you" fabric developed by the company won the first prize of outstanding fabrics in China printing and dyeing industry in 2023. Cedar Company’s "Research and Application of Improving Quality and Increasing Efficiency of High-grade Fine Ramie Fabric" won the second prize in the 4th Quality Innovation Competition of Hunan Province. Industry and Trade Company’s "Continuing the Future" series of works also won the Silver Award for Design Innovation of the 2023 Canton Fair.
VI. The Company’s Discussion and Analysis on the Company’s Future Development
(A) the industry pattern and trends
Due to the severity and complexity of the external environment, the global geopolitical pattern will continue to be impacted. The momentum of world economic growth is insufficient. It is predicted that the global economy will only grow by 2.9% in 2024, facing the risk of "stagflation", the foundation of American economic recovery is still not stable, and the prospect of EU economic recovery is hardly optimistic. Under this new situation, the "de-globalization" and fragmentation of global trade will intensify. However, China’s textile and garment foreign trade industry will still face the challenge of insufficient external demand and falling orders in 2024. However, as China’s economy continues to stabilize and improve, based on the advantages of China’s textile and garment industry chain and stable supply chain, we are looking for opportunities in times of crisis. Internally, through improving quality and efficiency, we will promote digital intelligence, green and low-carbon transformation and achieve high-quality development; We will continue to increase efforts to explore emerging markets, and maintain our sustained, healthy and stable development by innovating trade methods, expanding the export scale of intermediate products, and accelerating cross-border e-commerce to go to sea.
It is estimated that in 2024, textile and garment exports will gradually stabilize and resume growth. We will continue to pay close attention to the development and changes of the global situation and take effective measures to ensure that 2024 is the target of the company to drive the development of the industrial chain with hemp clothing and home. We will anchor the beautiful blueprint of the three-year action plan, strengthen our confidence and maintain our strength, seize all favorable opportunities and use all favorable conditions to cope with the changes in the situation.
Linen textile, as an important industry in linen textile industry, is a manufacturing industry with comparative advantages in China. At present, more than 70% of the world’s flax fibers are processed in China, and the finished products cover the whole world. China flax fiber is mainly imported, accounting for more than 90% of the annual processing capacity. In recent ten years, the annual import of flax raw materials is about 120,000-140,000 tons, and about 30% of flax yarns produced in China are directly exported to all parts of the world. However, in recent years, due to the influence of many factors, the export volume has generally shown a slight decline. In 2023, the main flax producing areas in Europe were affected by the climate. The flax plants grew poorly, the maturity was not enough, the length was much shorter than in previous years, and the quality was uneven, and the decline was obvious. This influence will be more obvious in 2024.
Due to the rising price of flax raw materials, many spinning mills seek for other hemp raw materials to replace them, and they have set their eyes on hemp and ramie, thus stimulating the use of hemp and ramie. At present, the prices of ramie raw materials, yarns and fabrics are relatively stable, and there is no shortage of raw materials. At present, the price difference between ramie and flax and hemp products has been widened, which has great value space.
(II) Company development strategy
Guided by Socialism with Chinese characteristics Thought of the Supreme Leader in the New Era, we will thoroughly implement the spirit of the 20th Party Congress, fully and accurately implement the new development concept, focus on the manufacturing industry of hemp products with the theme of enhancing the core competitiveness of products and realizing the high-quality development of enterprises, adhere to the development direction of high-end, intelligent and green, improve the supply chain of industrial chain, move towards the middle and high end of the value chain, enhance the ability of scientific and technological innovation, and strengthen the construction of Huasheng’s own brand and marketing. Improve product competitiveness, scientific and technological innovation and brand influence, help the revival of Hunan ramie industry with characteristics of people’s livelihood, and meet the people’s demand for high-quality hemp products.
(3) Business plan
2024 is a crucial year to promote the development of industrial chain with hemp clothing and home furnishing. We will anchor the beautiful blueprint of the three-year action plan, strengthen our confidence and maintain our strength, seize all favorable opportunities and use all favorable conditions to cope with the changes in the situation.
(1) Strengthen the main business, increase confidence and go all out to achieve high-quality development.
Accelerate the layout of the industrial chain, realize that all enterprises can grasp their fingers and fight together, and the back-end clothing plate will drive the front-end textile plate to upgrade. Increase research and development efforts in fabrics and styles to achieve a breakthrough in single products. Based on the existing platform, create a new platform, and work together to create a Huasheng product matrix on the basis of the differentiated development of apparel companies, industry and trade companies and wholly-owned subsidiaries, so as to become a new profit growth pole and realize the overall brand output.
(2) Forging long boards and making up short boards, and going all out to improve the level of scientific and technological innovation.
Unswervingly regard scientific and technological innovation as a powerful engine to cultivate new quality productivity, and promote the construction of original technology source of ramie products to take a more solid step. The first is to increase technology research and development. Around the end products of business men’s wear, outdoor leisure and high-grade bedding, we will develop high-end hemp blended composite new fabrics and form clothing end products to market. The second is to accelerate the construction of an innovation platform system. Lead or participate in the construction of ramie material laboratory, and constantly improve the quality standards and scientific and technological content of Huasheng products. The third is to improve the level of intelligent manufacturing. Huasheng Industry & Trade increased the product payment rate by more than 20%, and the automation coverage of textile technology company increased from 30% to more than 50%.
(3) Inventory and incremental control, and make every effort to speed up the disposal and revitalization of important assets.
Focus on two plots, adhere to the principle of marketization and legalization, advance steadily and orderly according to laws and regulations, and avoid all kinds of risks in the process of asset disposal. Effectively turn asset resources into valuable capital, provide financial guarantee for the development of industrial chain enterprises, and help the development of main business.
(4) the blade is inward, and it is really hard to move, and go all out to make good use of the key measure of reform.
First, deepen the reform around giving play to the three roles of scientific and technological innovation, industrial foundation and safety support, and provide strong support for the development of the main business. The second is to achieve job promotion, personnel entry and exit, and income increase and decrease. Promote the pilot project of professional managers and the tenure system and contractual management of managers as a whole. Continue to implement the system of competition for posts, final adjustment and incompetent withdrawal. The third is to adhere to the "two consistency" and integrate the party’s leadership into all aspects and fields of corporate governance. Build a professional, responsible, standardized and efficient board of directors to ensure the management autonomy of managers. Continuously improve the modernization level of corporate governance system and governance capacity.
(5) Strengthen party building, promote integration, and go all out to lead the high-quality development of the main business with high-quality party building.
Put the party’s political construction in the first place, integrate the party’s leadership into all aspects of corporate governance, and promote the development of various undertakings. Hold firmly the main responsibility of ideological work and hold firmly the main position of propaganda and ideological work. Deepen the reform of the system and mechanism of talent development and optimize the professional structure of the team. Adhere to the construction of party building and United front organizations and strengthen the construction of trade unions. Continue to promote the construction of "clean and honest", strengthen supervision and inspection, and strictly enforce discipline and accountability. Compaction of production safety responsibility, careful investigation of all kinds of problems and hidden dangers, to ensure overall stability.
(4) Possible risks
1. Macro risks
The new round of geopolitical conflicts continues to deepen, the demand is sluggish, the "scar effect" of energy crisis, debt risk and epidemic situation has not subsided, anti-globalization trends such as unilateralism and protectionism are on the rise, global production and logistics are hindered, the growth momentum of the international market is weakening, and domestic demand is sluggish, so the development of textile industry is facing more obstacles. The complexity, instability and uncertainty of the external situation still exist in 2024, but China’s economy has strong resilience, great potential and sufficient vitality. On the whole, there are more favorable conditions than unfavorable ones, and there are still many factors supporting the stable and healthy development of China’s economy.
Due to the multiple influences of macroeconomic environment and import and export policies, the company will continue to enhance its ability to resist risks through effective management means, try its best to overcome possible difficulties and challenges, and keep the overall operation smooth and orderly.
2. Risk of exchange rate fluctuation
The functional currency of the company’s consolidated statements is RMB, and the main import and export business is mainly foreign currency settlement such as US dollars. Exchange rate fluctuations may bring certain exchange losses to the operation. The company will continue to strengthen risk awareness, study financial instruments, and control exchange rate risk within a sustainable range.
3, labor cost risk
The company belongs to a completely competitive enterprise, a labor-intensive traditional industry and a heavy-asset production enterprise. The rising labor cost, rising raw material prices, large investment in the upgrading of fixed assets and equipment, low scientific and technological content, and low degree of marketization have caused sustained losses in its main business for many years. The company will continue to explore intelligent industrial upgrading and continuously reduce labor costs.
4. Risk of talent shortage
The company is relatively short of high-quality managers, leading project R&D leaders, professional production technicians and sales staff, which may restrict the company’s product R&D upgrading and market development in the future and bring risks to the company’s operation. The company will increase the introduction of all kinds of talents.
