In early November, foreign trade orders from small household appliances, furniture and other industries frequently exploded, arousing heated discussion in the market. At present, there is still uncertainty about how many buckets of rice the surge in foreign trade export orders can increase the income of export companies.
The industry’s main concern about the impact of foreign trade orders on performance also comes from the recent accelerated appreciation of the RMB. The RMB exchange rate against the US dollar has returned to the era of 6.5 yuan.
“In the first half of the year, foreign trade exports had a difficult time, and they were all counting on orders in the second half of the year to support the full-year revenue. Therefore, the performance in November and December has an important impact on the full-year performance of listed companies. The impact cannot be ignored. The appreciation of the RMB has posed a greater challenge to enterprises mainly engaged in export business. Production capacity, raw material supply chain, and logistics costs will also directly affect the placement of orders.” said an analyst in a traditional industry.
Don’t make money taking orders?
The impact of the epidemic on foreign trade exports is weakening. According to data from the General Administration of Customs, foreign trade import and export have stabilized quarter by quarter, and the cumulative growth rate has turned from negative to positive. In the first and second quarters of this year, my country’s import and export growth rates were -6.5% and -0.2% respectively; in the third quarter, there was a significant recovery, with exports reaching 5 trillion yuan, an increase of 10.2%. Among them, China’s export volume reached 1.62 trillion yuan in October, a year-on-year increase of 7.6%.
Since November, foreign trade exports have shown signs of further recovery. Many industries such as small household appliances, furniture, and textiles have experienced an explosion of foreign trade export orders. Some companies have said that orders on hand have been scheduled until next year. Mid.
However, Shanghai Phoenix announced that the media reported that “the overseas bicycle orders received by Shanghai Phoenix have been scheduled until June next year”. This is based on customer order requirements and the company’s supply chain. The results of comprehensive determination of system and other aspects, but whether the order can be realized depends on the company’s existing production capacity and other aspects, and there is uncertainty about whether it can ultimately make profits and the time when it will be realized.
“But to realize the conversion of orders on hand into profits, we cannot just look at the number of orders. In fact, when the order volume exceeds the company’s production capacity, the uncertainty becomes greater. From a medium to long-term perspective Look, the short-term surge or decline in orders is the special supply and demand background caused by the epidemic. Enterprise operations should be based on certain research and predictions of the entire market, expand business and promote profit levels. It is difficult to blindly ‘follow the old road and run the volume’ model Adapt to changes in the overall consumer trend.” said a senior practitioner in the foreign trade industry.
The impact of exchange rate fluctuations cannot be ignored
In fact, the RMB appreciation has continued for four months since August. The latest data released by the Bank for International Settlements (BIS) shows that both the real effective exchange rate index and the nominal effective exchange rate index of the RMB rose for four consecutive months in October.
The appreciation of the RMB reflects the continuous improvement of my country’s economic fundamentals and also poses challenges to foreign trade export companies. “From the perspective of export structure, most of our exports come from reprocessed lower value-added products. The main factors that were once competitive in overseas markets were price and scale. After the appreciation of the RMB, foreign trade export companies are bound to increase their sales prices. To maintain profits, this will directly weaken the price competitiveness of my country’s exports.” said the aforementioned analyst.
However, when the sales prices of export enterprises remain unchanged, if measures are not taken to manage exchange rate risks in export receipts, the RMB receipts from exports will decrease, which is reflected in the financial reports of listed companies in the form of exchange gains and losses, The difference in conversion of foreign currency statements further affects corporate profitability.
Judging from the three quarterly reports of listed companies, the appreciation of the RMB since August has had an impact on the profits of export-oriented foreign trade companies.
Lianfa Co., Ltd. is a full-industry chain textile enterprise integrating spinning, dyeing, weaving, finishing and garment making. The company previously responded on the Huayi platform: It is true that European and American retailers have transferred Indian textile orders to my country for production, but the company mainly produces pure cotton products such as yarn-dyed fabrics, printed and dyed fabrics, home textile gray fabrics, and the current benefits are not obvious.
Not only that, in the third quarter of this year, the company’s financial expenses increased by 66.96% compared with the same period last year, mainly due to fluctuations in the RMB exchange rate. However, exchange rate fluctuations will not have a direct impact on the company’s performance.
Pengding Holdings’ net profit in the first half of 2020 increased by 29.92% year-on-year, while net profit attributable to the parent company in the first three quarters fell by 18.99% year-on-year. It is understood that Pengding Holdings’ overseas revenue accounted for more than 60% of its total revenue in the first half of the year. Large fluctuations in exchange rates directly affect the company’s exchange profits and losses, which in turn causes fluctuations in net profit attributable to the parent company. The company was greatly affected by exchange losses, causing financial expenses in the third quarter to increase by more than 200 million yuan compared with the same period last year.
In addition, Hikvision also stated that the company had an exchange loss of approximately 500 million yuan in the third quarter of this year, while the exchange gain in the same period last year was 400 million yuan, which had a negative impact on the year-on-year growth of net profit in a single quarter. pressure.
“Exchange rate fluctuations are objective external factors. Generally speaking, companies can use forward foreign exchange settlement and sales business to maintain the currency value of the company’s expected U.S. dollar foreign exchange income, lock in future RMB cash inflows, and protect expected operating income. Realization. For foreign trade listed companies in traditional industries, they should not be overjoyed or overjoyed by changes in short-term orders.We must focus on the long-term development trend of the industry and truly serve the entire market. “The above-mentioned analyst added.
Some companies are urgently locking in foreign exchange exposure next year
Recently, international investment banks have generally raised their forecasts for the RMB exchange rate in 2021. The value has basically been adjusted from the previous range of 6.5 to 6.7 to the range of 6.2 to 6.4, but the fluctuations will continue to amplify.
“This week our export corporate clients have reported their foreign exchange exposure for the entire next year. All of them were locked in advance (i.e. forward exchange settlement), totaling US$500 million, just for fear that the RMB would continue to fall below 6.3. ” said a person from the corporate business department of a joint-stock bank.
The RMB exchange rate against the US dollar has risen from the weakest position of 7.15 in May this year to the current level of around 6.58, with an appreciation rate of nearly 8%. The momentum of appreciation caught all bank traders and companies by surprise, and this impact has been reflected in companies’ exchange gains and losses.
Although China’s exports have recovered rapidly, and many types of export products have Price increases began in the third and fourth quarters, but the strength of the RMB caused some companies to suffer profit losses, and this impact is expected to continue in the fourth quarter.
For A-share listed companies, exchange gains and losses are involved There are mainly three situations: first, export-oriented enterprises, including companies with a large proportion of external sales or external purchases; second, companies that raise funds in foreign currencies and a large proportion; third, companies with a large number of overseas investment businesses. From the third quarter report Judging from the situation, the exchange gains and losses of relevant companies have increased significantly, distorting their profit performance.
Export companies made emergency settlements of foreign exchange
“In the first half of the year, some export companies have already Half of the US dollar income next year will be settled forward, and the remaining half is still on the sidelines because it is believed that the RMB may fall back after rebounding. But now it seems that this expectation has been disappointed. Companies are afraid that the RMB will continue to rise, so they made an emergency decision this week to make forward foreign exchange settlements for the remaining exposures. “The above-mentioned banker told reporters.
The export business of the above-mentioned enterprises accounts for as much as 90%, mainly exporting garden machinery and equipment to Europe and the United States. Since most of their income is denominated in foreign currencies such as US dollars, with the appreciation of the RMB, foreign exchange After the income is converted into RMB, it is equivalent to a reduction in the company’s income. Therefore, companies often conduct forward exchange settlement through banks to lock in next year’s foreign exchange settlement price.
It is understood that if you choose to lock all foreign exchange positions in 2021 now, , then from January to December next year, the price of forward exchange settlement will be approximately 6.6074~6.7663, showing monthly depreciation.
“For companies, if the RMB rises to around 6.3 against the US dollar next year, If an enterprise does not lock in its exposure now, the same income of US$1 million next year may only be exchanged for 6.3 million yuan. Now, after handling forward exchange settlement, it can ensure that it will receive about 6.7 million yuan, and this also facilitates the enterprise to proceed in advance. financial plan. “A foreign exchange strategist from another foreign bank told reporters.
However, among the many export-oriented companies, there are not many that urgently lock foreign exchange like this one. After sorting out the 2019 annual reports of listed companies, it was found that even Those companies that are highly sensitive to exchange rate fluctuations and where exchange gains and losses account for a large proportion of net profits rarely adopt exchange rate management and risk measures. Even if they do, they are small-scale tentative transactions with no awareness of hedging. Old problems such as insufficient subjective initiative and fear of being held accountable for misjudgment.</p
