 2015-03-12 |
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China's Plastic Film Market Faces Ongoing "Oversupply" Concerns, Putting Pressure on YC’s Operations
By Zhao Xiao-Hui, Taipei - March 11, 2015
YC Group (4306-TW), the leading tape manufacturer focused on the Chinese market, saw its consolidated revenue for the first two months of the year decrease by 14.14% year-on-year. YC attributed the decline to the persistent oversupply in China’s plastic film market. If crude oil prices continue to fall, the operational pressure will only worsen.
In February, due to fewer working days and reduced demand in China, YC Group’s consolidated revenue was NT$1.06 billion, a year-on-year decrease of 27.45%. Cumulative revenue for the first two months dropped by 14.14% year-on-year.
ACHEM (1715-TW), a subsidiary of YC, reported NT$662 million in consolidated revenue for February, a 17.4% year-on-year decrease, and a cumulative year-to-date revenue drop of 7.78%. Xinzhou Global (3171-TW), which produces packaging materials and operates retail distribution channels, saw consolidated revenue of NT$115 million in February, down by 3.8%, with a cumulative two-month revenue decline of 5.5%.
Looking ahead to March, YC expects the Chinese market to stabilize, alongside increasing orders from export markets in the U.S. and Japan, allowing revenues to return to normal levels. With ACHEM's Yangmei PE plant and the Haian plant in China gradually coming online this year, along with the benefits of vertical integration, the group's overall operations are expected to show a steady recovery and growth trend.
As for Xinzhou Global, YC noted that after the integration of its packaging business, its operational efficiency in Taiwan has significantly improved, and Taiwan’s packaging market is projected to grow steadily this year. Meanwhile, after last year's restructuring, China's "Master of Packaging" has achieved break-even status on a monthly basis, and the company plans to expand its operations in central and northern China, projecting gradual growth in Xinzhou’s future operations.
However, YC acknowledged that the continued low crude oil prices, coupled with the oversupply in China's film market, have led to a decline in film product performance. If crude oil prices continue to drop, the pressure on operations will worsen, presenting challenges to future revenue and profit growth. |
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