Brief analysis of listed spandex companies in 2022-sharply reducing profit

In 2022, the macro environment was complex and volatile, with global economic slowdown caused by the US dollar rate hike, energy prices at a high level due to the Russia-Ukraine war, and weakened market liquidity due to the COVID-19 epidemic in Chinese mainland. As a result, the global economy entered a stagflation stage characterized by high inflation and low growth. Meanwhile, the impact of the macro environment was particularly evident on the spandex industry in 2022, with negative feedback from the demand side. Thus, there was significant deterioration in industry prices, efficiency and other indicators.

The 2022 annual reports of listed spandex companies have been released, mainly involving three listed companies: Huafon Chemical, Xinxiang Chemical Fiber, and Tayho New Materials. The important data related to spandex in the annual reports was summarized below:

Huafon Chemical mainly engages in the R&D, production and sales of spandex fibers, polyurethane raw materials, adipic acid and other polyurethane products. According to the annual report, all three major product divisions of the company were impacted to varying degrees by factors such as fluctuations in raw material prices and demand shocks. The company achieved a total operating income of approximately 25.88 billion yuan in 2022, a year-on-year decrease of 8.75%, and a net profit attributable to shareholders of the listed company of 2.84 billion yuan, a year-on-year decrease of 64.2%. During the reporting period, the designed capacity of spandex was 225kt/year, with a capacity utilization rate of 110.91%. The in-construction capacity was 300kt/year, of which 100kt/year tons entered the trial production stage in 2023. The chemical fiber production was 249.5kt/year, with a sales volume of 247.8kt/year and achieved an operating income of approximately 9.65 billion yuan, accounting for 37.28% of the total operating income, a decrease of 29.45% compared with 2021. Operating costs increased year-on-year by 19.70% while the gross profit margin decreased by 36.76% on annual basis.

Xinxiang Chemical Fiber's main business is the production and sales of biomass cellulose filament and spandex, belonging to the chemical fiber industry. In 2022, Xinxiang Chemical Fiber achieved an operating income of 7.274 billion yuan, a decrease of 17.6% compared to the previous year; the net profit attributable to shareholders was -435 million yuan, down by 131.4% on the year. During the reporting period, the company produced 179.7kt of chemical fibers and sold 182.8kt; among them, the production and sales of spandex were 112.8kt and 111kt, respectively, accounting for 51.17% of the company's operating income and 61.74% of the company's operating costs. According to the data from CCFGroup, the spandex capacity of the factory reached 188kt/year in end-2022.

Tayho New Materials is specialized in the R&D, production, and sales of high-performance fibers such as spandex and aramid fibers. The leading products are spandex, meta-aramid, para-aramid, and related upstream and downstream products. In 2022, Tayho New Materials achieved an operating income of 3.75 billion yuan, a year-on-year decrease of 14.85%, and a net profit attributable to shareholders of the parent company of 436 million yuan, down 54.86% year on year. The company's chemical fiber production was at 54.4kt and a sales volume was at 54.2kt. Among which the production of spandex filament was 39.4kt, with a sales volume of 40.1kt, accounting for 42.67% of the company's operating income and 55.43% of the company's operating costs. According to the capacity data from CCFGroup, at the end of 2022, the spandex capacity of the factory was 65kt/year.

In terms of the spandex business, during the reporting period, the company timely launched the relocation work of the Yantai factory, significantly phased out obsolete capacity, actively promoted new project construction, improved the supply capacity of large batches of high value-added products such as coarse and high-temperature-resistant spandex, and reduced production costs, improved production efficiency and overall competitiveness through the transformation of new and old energy of motion.