Profit analysis in the hottest glass

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Profit analysis in glass

from the perspective of cost control, glass is one of the most unfortunate industries. In the first half of 2009, lixianyi, founder of Xinyi Glass (), encountered this misfortune. At that time, the company's glass business revenue decreased by 13.6% year-on-year, and its net profit decreased by 44% year-on-year. However, the particularity of the glass industry lies in the fact that a product line cannot cease fire after ignition. Generally, it will cease fire for overhaul after 10 years of use. The cost of a single production line to re ignite and operate the machine is often tens of millions

demand fluctuation is only one of the risks of the glass industry. At the same time, it is also a highly concentrated industry: as the world's largest glass consumption market, the concentration of the top five domestic glass industries is only about 30%, while in Europe and North America, the second and third largest global glass consumption, this figure is as high as 92% and 81% respectively

lixianyi initially chose the automobile glass maintenance market as a breakthrough. Compared with automobile OEMs, the chromaticity is not harmonious. This is a market with relatively moderate competition. However, unlike Fuyao Glass, which only supplies glass for new cars, as a supplier of rear mounted glass, Xinyi Glass needs to provide different models of products for various old models at the same time. At present, it supplies tens of thousands of kinds of automobile glass

"in the automotive glass industry, it is difficult for companies without scale advantage to survive." Liyouyou, executive director of Xinyi Glass Holding Co., Ltd., said

so many product models are a nightmare for a company whose gross profit in the industry is only 30%. However, it seems that the company has not been dragged into difficulties by so many product lines. Instead, it has gradually expanded its product line from automotive glass to architectural glass, float glass, photovoltaic glass and other fields

as of december31,2009, the annual revenue of Xinyi Glass had reached 3.4 billion yuan. During the past five years, the compound annual growth rates of the turnover and net profit of Xinyi Glass were about 30.1% and 31.3% respectively. The net profit margin has remained the industry leader among listed companies for five consecutive years (all major competitors have been listed). Now, Xinyi Glass has become the world's largest supplier of automotive replacement glass (agr), with a global market share of more than 20%

super product line

lixianyi initially ran an auto parts company. At that time, the glass parts needed by domestic cars basically depended on imports. Because glass was fragile, the import logistics cost was relatively high, and the price of glass was also fried

"at that time, there were no enterprises producing automobile glass, and some were only small OEM factories." Liyouyou believed that it was a crazy period - the market needed a lot of automotive glass, and as long as it was a product that could be called glass, it could be used

the shortage of supply in the market has led to the rapid growth of this industry. Most glass manufacturers have chosen OEM brands to help complete the installation of glass for the whole vehicle. "At that time, it was just the beginning. There were very few cars to be repaired, so everyone crowded into OEMs." However, Xinyi Glass, which has turned from auto parts trade, has decided to enter the auto repair and replacement market. "There are fewer competitors here, and there will be more space in the future." Li Youyi said

the automobile after-sales service market has high requirements for the investment in the early product development of enterprises. Because there are many automobile models, it needs different types of components to support. This is the important advantage of Xinyi's transition to after-sales automotive glass. Their previous experience in parts trade enables them to adapt to the needs of a variety of models

however, the domestic market was not large enough at that time. In 1997, the U.S. car ownership reached 160million, while the domestic car ownership was less than 15million. For Xinyi Glass, the foreign maintenance market is a larger space. "At that time, we thought that the export market could promote the domestic market, so we decided to try in North America first." Xiaowenfan, vice president of Xinyi Glass, was not sure that this was a successful attempt at that time, but he was shocked by the market when he arrived in the United States - there were more than 20000 models, and at that time, Xinyi Glass provided no more than 50 models

when the search engine generates a summary, it can be summarized into two methods: one is the "static" method. When the team responsible for automobile glass sales is only a dozen people, "where there are exhibitions, there are them." Liyouyi said that in addition to attending the conference, they are more often holding the yellow pages of the enterprise. As the information channel is very limited, we can only start from the regional dealers. "In the leading year, only twoorthree dealers are willing to purchase continuously."

since there are not many domestic competitors, the advantages of Chinese products in terms of price and quality have enabled Xinyi to develop rapidly. Three years later, it began to set up offices abroad and selectively cooperate with local dealers. In overseas branches, most of the general managers recruited by Xinyi are from home

most importantly, Xinyi Glass has realized the rapid accumulation of automobile glass product varieties through foreign business - there are more than 5000 varieties of front windshield glass alone. The complete variety of automobile glass and short supply cycle have become one of the advantages of Xinyi Glass

in 2005, automotive glass products accounted for 71.8% of Xinyi's main business income, 60% of which were exported to more than 80 countries around the world, and the annual output of automotive glass was 10million pieces. However, the success of the auto parts glass market is not enough to support Xinyi Glass to become one of the top companies

in the glass industry, it is a common practice to rapidly expand the scale of enterprises and balance industry risks by expanding applications in multiple industries. Like Fuyao Glass, Xinyi Glass has successively entered the fields of architectural glass, photovoltaic glass and so on

it is not easy to develop new industries. Until 1998, after Xinyi's product line was extended to architectural glass, the customers at that time were mainly retail investors. The sales teams began to run city by city, and gradually spread to the whole country with Guangzhou as the center. After visiting customers in one city, they went to another city. It was not until 2004, when the insulating glass was developed, that the sales network of Xinyi across the country began to be built

today, Xinyi has a production line that can produce more than 30000 specifications of automotive glass and various types of architectural processed glass. "For a customer who purchases multiple kinds of glass, we can meet 98% of his purchase." Li Youyi said

however, for an industry with a gross profit of only about 30%, such a large number of product lines can easily make Xinyi Glass gradually fall into the dilemma of low profit

cost reduction

in order to solve the problem of upstream raw materials being restricted, in February2005, Xinyi was listed in Hong Kong, and the first raised US $111million was invested in the construction of float glass production line. Xinyi Dongguan district has built two wharves, one for transporting heavy oil and the other for transporting silica sand, the main raw material for glass. The wharves can transport 300 small and medium-sized sintering, pelletizing, coking, ironmaking, steelmaking and casting technologies that do not meet energy consumption and environmental protection standards a day; Preparation technology of common hot rolled silicon steel, ground bar steel and ordinary carbon steel produced by industrial/medium frequency induction furnace; Except for conventional steel machining technology, 0 ton silica sand

the factory in Xinyi Dongguan district can produce more than 2700 tons of float glass every day after the production of raw materials. The float glass is directly connected with the production line of automobile glass for tempering, coating and other processing

"if you make your own raw materials, you can get the goods in 10 to 15 days. The goods are delivered quickly, which speeds up the cash flow turnover of these two requirements, which are contradictory." Mayiji, manager of the marketing department of Xinyi Glass, said that as he made raw materials, the specification and size of glass were easier to control, and the cutting rate of glass would be higher, reducing waste. After the transformation, the net profit margin of Xinyi increased from 18.8% in 2005 to 20.1% in 2006

the self-produced float glass not only meets its own demand for the original upstream glass, but also reduces the cost by about 10%. In September2007, Xinyi Glass purchased two silicon placers, which further reduced the cost of the company

glass is a fragile product, so it has a certain sales radius, especially for automotive glass, which is about 200 km. The high-speed growth regions of the domestic economy are mainly the Pearl River Delta and the Yangtze River Delta. In particular, the demand for float glass in the Pearl River Delta is nearly 40% of the total market demand. By building factories in humen and Wuhu to radiate the Pearl River Delta and Yangtze River Delta, shortening the transportation distance can also save a lot of packaging expenses (about 100 yuan/ton) and transportation expenses

a report from China Merchants Securities pointed out that Xinyi Glass saves about 10% of its cost every year due to the reduction of packaging and transportation expenses

due to the continuous expansion of product lines, the relationship between factories of various products of Xinyi Glass has become closer and closer. Even for different types of glass, there will be a connection between them in the process. For example, automotive glass now also needs to achieve the effect of energy saving. This process is connected with the energy-saving link of insulating glass. The interlinked process can save equipment and machines and reduce costs

compared with peers, more cost savings of Xinyi Glass come from its own production system - from film replacement to material supply, from transportation to inventory management. At present, each company under Xinyi Glass has a material supply team, and the material procurement and production plans are coordinated and arranged by the sales supervisor

this approach speeds up the response time of the production department to the market. Even before the order is confirmed, the staff of the material supply team can know that there may be an order to be issued and will check which materials need to be purchased. The production department can know in advance how to arrange delivery to customers on time. When the customer needs to supply goods, Xinyi will supply goods through the time period specified by the third-party logistics company. The customer does not need too much inventory in the warehouse

"at present, the profit margin of automotive glass has been gradually compressed, and we will focus more on solar glass in the future." Liyouyou said that the supply of Xinyi solar glass accounted for 20% of the global demand in 2009

since 2006, Xinyi Glass has begun to invest more energy in research and development. At present, the company has a 150 person R & D team, which is responsible for the R & D of various product series of Xinyi. Liyouyou said that Xinyi Glass now develops 2500 new products every year, and the main development direction is to innovate product performance

the company now regards energy-saving materials as the trend of the industry. Its strategy is to turn itself into a R & D and manufacturer of energy-saving materials and sell relevant technologies to glass manufacturers in the future

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