Why was there such a huge loss when it was supposed to be a sure-profit deal?
On April 14th, local time, Stock investor Warren Buffett posted a photo of himself wearing a mask produced by BYD on his social media account, with the text, “My goal is to live a long life, and so far the progress is pretty good. And now, BYD masks are helping me.” ! Thank you!”…
BYD widely purchases melt-blown cloth
As we all know, BYD is a well-known automobile manufacturing company in China. However, in order to combat the COVID-19 epidemic and speed up the resumption of work and production, the car company BYD has recently invested in its role as a mask manufacturer.
On the evening of April 15, Nal Shares (002825), a listed company mainly engaged in the research and development, production and sales of digital printing materials, announced that the company had entered into cooperation with Shenzhen BYD Supply Chain that day. Management Co., Ltd. (hereinafter referred to as “BYD Supply Chain”) signed a procurement contract. BYD’s supply chain plans to purchase 100 tons of meltblown cloth produced by the company, with delivery time from April to July, of which the prepayment for goods delivered in April and May is 20 million yuan.
There are endless examples of large manufacturers like BYD switching to the production of masks in China:
Earlier during the epidemic nationwide As the epidemic spreads, people in many remote areas have begun to wear masks, and masks have become a daily “rigid necessity”. Due to the sudden expansion of demand, even if 3M and Honeywell run out of inventory and activate factories around the world to produce masks at full capacity 24 hours a day, 7 days a week, the “distant water” will not be able to save the “near fire”.
At this time, what is most needed is to focus on the power of Made in China. In order to fill the gap, major domestic companies have stepped forward and have been producing masks non-stop day and night since the Spring Festival.
Among them, a wave of magical operations by Robust Medical has been widely circulated on the Internet. As early as December 20, 2019, it was already producing masks at full capacity. It produced more than 100 million masks in more than a month, and its daily production capacity reached 3 million.
What’s even more amazing is that “big manufacturers” such as Sinopec, Shanghai-GM-Wuling Hongguang, and Foxconn have also renovated mask production lines to increase production capacity and make up for the gap.
On February 6, Sinopec (600028) posted a “hero post” on its official Weibo – “I have meltblown cloth, who has a mask machine?” “We can purchase all the masks that have been increased to support Hubei’s frontline fight against the epidemic, and we can also support local epidemic prevention and fight against the epidemic where the company is located.” It means that it has raw material meltblown cloth and is in urgent need of mask machines to increase the production of masks to fight the epidemic.
Epac, the subsidiary of Sinopec that is responsible for the production of masks this time, is the largest e-commerce platform for industrial products and has abundant reserves of meltblown cloth, the raw material for masks, so as long as The mask machine is available and production starts in minutes. Sinopec also stated that the company has melt-blown cloth, and if any company lacks this raw material, the company can transport it to your door.
It is not difficult to see that producing masks is not difficult. This is especially true for Foxconn, a manufacturing enterprise with decades of history that has no shortage of resources such as the ability to transform production lines, procurement of raw materials, and labor.
Industrial Fii (601138) announced on February 7 that it has added a new production line for medical masks. It is currently expected to achieve a daily production capacity plan of 2 million pieces by the end of February. Priority It is used for internal production and epidemic prevention protection for nearly one million employees of Foxconn Group; it does not occupy social resources and makes room for public demand for masks; in the future, it will actively provide external support and output depending on the situation, providing strong support for the current epidemic prevention and control work. At present, its first production line with a daily output of 100,000 masks is still in the trial production stage, and product qualification certification is still being applied for.
If “everything can be Foxconn”, then how come SAIC-GM-Wuling, the “national car”, would think of making masks?
On February 6, SAIC-GM-Wuling, a subsidiary of the automobile leader SAIC Group, planned to work with suppliers to convert production lines to produce masks. Its dust-free workshop was renovated by Guangxi Construction Engineering Group and will be completed and put into use this month. The project plans to build a total of 12 mask production lines, including N95 and general medical protective mask production lines, with a daily production capacity of more than 1.7 million.
Because masks and automobile sound-insulating cotton are made of the same material, SAIC-GM-Wuling and its joint suppliers can make masks by changing the production line.
In fact, companies such as Sinopec, Foxconn, and SAIC-GM-Wuling have high-standard clean workshops and sealing workshops, which are perfect for producing masks.
Compared with the “cross-border” efforts of giants such as Sinopec, Foxconn, and SAIC-GM-Wuling, it is even more natural for diaper and underwear manufacturers to switch to mask production.
A number of businesses such as Daddy Baby, Sanqiang Underwear, Hongdou Clothing, and Mercury Home Textiles urgently applied for qualifications. They stopped the original production plans of diapers, underwear, etc. and changed them overnight. Medical masks help the frontline fight against the epidemic. Daddy Baby’s official Weibo shows that after switching to the production of masks, its production capacity has been accelerated to 1.4 million as of February 6.
As the epidemic enters the most difficult period of the outbreak, not only masks have received support from various companies, but also companies have come forward to provide supplies that are urgently needed during the epidemic..
The powerful Jinjiang clothing company took the initiative to switch production of protective clothing this time. After donating 3 million yuan, Lilang Group worked closely with Jinjiang garment companies such as Silan Group, Jiujiuwang Food, and Xunxing Zipper to “make strong contributions, have workshops to produce workshops, people to provide people, and materials to produce materials.” In 3 days This will enable the mass production of professional medical protective clothing.
Production changes are everywhere. Zhejiang Guyue Longshan Shaoxing Wine plans to produce 60,000 bottles of disinfectant alcohol. A company that produces liquor in Liaocheng, Shandong Province also temporarily decided to switch production and donated 100,000 bottles of 75% alcohol to the front lines of the fight against the epidemic.
However, not all conversion companies have reaped huge profits
As the “big brother” in China’s casual clothing field, Souyute is no exception. In the early days, it invested 200 million yuan to produce masks, but it suffered a loss of 75 million yuan in 3 months. It was supposed to be a business that was guaranteed to make a profit, but why did it suffer such a huge loss?
The maximum loss will be 75 million in 3 months
Not long ago, Souyute has just announced its new quarterly financial report. According to data, the company expects losses to be between 50 million and 75 million yuan. Two months ago, the company announced an investment of 200 million yuan to produce masks and other medical supplies. It is said that this time point is very appropriate, because there is currently a shortage of masks in the world, so why will there be a loss of 75 million yuan in three months?
In the financial report, although Souyute stated clearly that the company’s losses were due to the impact of the epidemic, which caused serious damage to its clothing business . But in fact, the business that really caused it to stumble was the “transformation” two months ago. At that time, seeing that medical resources were in short supply around the world, Souyute threw himself into it without any hesitation. Unexpectedly, he did not make any money but instead suffered huge losses.
The initial investment is large and the production capacity cannot keep up
As a clothing company, it is not an easy task for Souyute to produce medical resources such as masks. The first thing to solve is the problem of production equipment. At that time, Souyute purchased dozens of mask machines at once in order to mass-produce them as quickly as possible, spending a total of tens of millions of yuan. In addition, there will be a new purification workshop and a lot of labor costs.
Despite a lot of investment, the company’s ability to produce masks has not improved. It is reported that until the middle of last month, the company only had four mask machines in operation. Even today, there are only about 20 machines that can stably produce masks. Without production capacity, there will be no sales, which means huge losses every day.
The unit price of the global mask market has fallen
In fact, Souyute Maybe the idea of making masks is too simple. In many people’s minds, it is enough to produce masks with labor and machines, but things are far from that simple. Because masks are medical resources, the relevant standards are very strict. The cost and requirements for the purification workshop alone are very high.
Last point, the masks produced by Souyute have no advantage in the market. Now that the domestic epidemic situation has improved, it is hard to see that masks are difficult to buy. The only thing that can be done is to export. At this time, the price of global masks is also falling, and they are not as popular as before. According to media reports, in the middle of last month, a domestic company exported 8 million masks overseas, with a total price of hundreds of millions of yuan, and an average of 13 yuan each. But in just half a month, the price of exported masks was only about 2 yuan.
Summary: Although Souyute is interested in producing masks, he lacks certain knowledge about related industries. understanding. Due to the high investment in the early stage and the delay in increasing production capacity, the best golden period for making money was missed. Nowadays, although production capacity has been improved to a certain extent, it has also encountered the problem of falling unit prices of masks. It is strange that Souyute is not losing money.
Expanding production capacity is not something that can be accomplished overnight. A mask requires a cycle from upstream raw material production, to midstream manufacturing and packaging, to downstream distribution and sales through various channels.
Having said so much, what do you think of the prospects of the mask industry? Welcome to share and discuss in the message area. I will be with you in the changes and progress of the apparel industry! </p
