Yue Yuen to move more production into SE Asia as trade war continues
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Hong Kong-listed footwear manufacturer Yue Yuen Industries says it expects to move more of its manufacturing from China to other Southeast Asia countries as the US-China trade conflict shows no sign of abating.
“The US government’s plans to implement a 10-per-cent tariff on US$300 billion of exports from the PRC, which will include footwear, could further accelerate the pace of capacity migration from the PRC to Southeast Asia,” said chairman Chu Chin Lu in the management review of the company’s half-year results.
Vietnam accounted for 45 percent of Yue Yuen’s shipments in the first half of this year and Indonesia for 38 percent. Mainland China accounts for 13 percent
“The group will continue to migrate its manufacturing capacity from the PRC to Southeast Asia, while being mindful of the labor supply situation in countries where we operate, especially in Vietnam,” said Lu, who is also worried that continued uncertainty surrounding both the US and China’s future trade policies may impact on consumer sentiment.
The group’s manufacturing business produced 163.2 million pairs of shoes in the six months to June 30, an increase of 2.7 percent year on year.
The average selling price per pair was US$16.49, up by 2.2 percent.
Sales through the company’s listed subsidiary Pou Sheng, increased by 12.3 percent returning 1.968 billion to Yue Yuen. In RMB terms (Pou Sheng’s reporting currency), revenue during the first half of increased by 19.4 percent.
“Vietnam accounted for 45 percent of Yue Yuen’s shipments in the first half of this year and Indonesia for 38 percent.”
Yue Yuen reported group revenue to $5.071 billion for the half-year, up by 6.3 percent with profit attributable to shareholders up by 10.5 percent to US$165.9 million. Non-recurring profit was boosted by $19.1 million from the disposal of Texas Clothing Holding Corp.
Lu said the group faced several headwinds during the half other than the trade war.
“The group continued to face operational disruptions and challenges resulting from brand customers’ demands for more flexible procurement approaches and changing consumer preferences. This resulted in more volatile monthly sales orders, uneven capacity utilization, and lower production efficiency, alongside the increased complexity and versatility of product portfolios during the period,” he said.
“To address these challenges and sustain our long-term position, we have continued to ramp-up the implementation of automated production and enhance our operating efficiency through process re-engineering to provide differentiated value-added and one-stop OEM/ODM services to customers with whom we have maintained long-term relationships. We also furthered our efforts to foster environmental sustainability, eyeing at the long-term growth viability of our business.”
The group’s athletic footwear category outperformed all other categories as a result of the global athleisure trend, accounting for 78.1 percent of footwear manufacturing revenue in the first half of the year. Casual and outdoor shoes accounted for 19.7 percent of footwear manufacturing revenue.
Questions & Answers
Q.What proportion of Yue Yuen’s current footwear production is still based in Mainland China?
What proportion of Yue Yuen’s current footwear production is still based in Mainland China?
Mainland China currently accounts for 13 percent of Yue Yuen's total shipments. This is significantly less than the 45 percent from Vietnam and 38 percent from Indonesia in the first half of this year.
Q.Beyond the trade war, what other challenges has Yue Yuen faced recently?
Beyond the trade war, what other challenges has Yue Yuen faced recently?
The company has experienced operational disruptions due to brand customers demanding more flexible procurement and changing consumer preferences. This led to volatile sales orders, uneven capacity use, and lower production efficiency, alongside more complex product portfolios.
Q.How did the athletic footwear category perform compared to other types of shoes?
How did the athletic footwear category perform compared to other types of shoes?
Athletic footwear significantly outperformed all other categories, driven by the global athleisure trend. It accounted for 78.1 percent of the footwear manufacturing revenue in the first half of the year.
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