On October 17, Shenzhou International (02313) announced:
“will invest approximately US$100 million (approximately RMB 708 million) to build a garment production facility specifically for Adidas in Vietnam.”
The company expects that new garment production facilities will be gradually put into operation in 2021. It believes that the construction of garment production facilities in Vietnam will diversify the production base, relieve the tight production capacity, and provide flexibility in the increasingly complex international trade situation.
The original text of the announcement is as follows
Shenzhou International Group Holdings Co., Ltd. (hereinafter referred to as the “Company”, together with its subsidiaries, collectively referred to as the “Group”) The Board of Directors (the “Board”) is pleased to announce that the Group intends to build a new production facility for adidas in Vietnam.
The Group will invest approximately US$100,000,000 to build a garment production facility specifically for Adidas in Vietnam. The groundbreaking ceremony was held on October 15, 2019. It is expected that the new garment production facilities will be gradually put into operation starting in 2021. The Board believes that the construction of garment production facilities in Vietnam will diversify the Group’s production base, relieve the Group’s tight production capacity, and provide flexibility in the increasingly complex international trade situation. Therefore, the Board believes that the construction of new production facilities will be beneficial to its customers, the Group and its shareholders as a whole.
By order of the Board of Directors
Shenzhou International Group Holdings Co., Ltd.
Chairman
Ma Jianrong
China • Ningbo, October 17, 2019
Screenshot of Shenzhou International announcement
Nike and Adidas are two competing giants in the sporting goods industry. In order to protect the trade secrets of both parties and avoid producing homogeneous products , Shenzhou International established exclusive factories for Nike and Adidas in 2006 and 2007 respectively. Such a considerate move also deepened the bond with major downstream customers.
In addition, under the automated production model, Shenzhou International’s production capacity is constantly expanding, and it has successively established fabric factories and garment factories in Vietnam. This investment is also to further increase production capacity.
Extended reading:
From the perspective of layout,
·Shenzhou International as early as 2005 It began to set up garment factories in Cambodia, and equipped printing and embroidery production processes in Cambodia in 2007. Subsequently, Shenzhou International built a factory in Vietnam to expand production;
·In 2014, Shenzhou International The first phase of the Vietnamese fabric factory project was put into operation;
· In 2015, the basic construction of the first phase of the Vietnamese garment manufacturing factory and the second phase of the fabric factory was completed, and the company’s overseas bases have also initially formed a vertically integrated structure. Production model;
·From 2016 to 2017, Shenzhou International’s Vietnam special fabric project was put into production, and the company’s fabric production in Vietnam reached 185 tons/day.
·In 2018, Shenzhou built new garment factories in Cambodia and Vietnam. So far, Shenzhou International’s production base has expanded from the original Ningbo to Anqing, Anhui, Quzhou, Zhejiang, as well as Cambodia and Vietnam. International employees (from Cambodia and Vietnam) account for more than 1/3.
·Shenzhou International also plans to add 5,000 workers in Vietnam in the second half of 2019 (the total number of local workers currently exceeds 11,000). Compared with previous years, the growth rate is slower. Shenzhou There will be greater international emphasis on improving worker efficiency through continued automation.
In order to adapt to the uncertainty of the trade environment, make full use of low-cost production factors in Southeast Asia, and comply with the industry trend of major brands shifting procurement to Southeast Asia, Shenzhou International has been actively Promote the process of building factories in Southeast Asia.
The overall judgment is that Shenzhou International’s main business revenue will maintain mid-double-digit growth in 2019/20, and the growth in revenue will mainly come from the contribution of production capacity expansion in Southeast Asia. From the demand side, the growth of the performance of downstream brand companies and the tendency of brand companies to concentrate their purchases on top suppliers will be positive factors that drive the company’s order growth.
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