Anta Shoes Raise 29% Profit

In the case of some shoemaking enterprises in Fujian and Guangdong, which are on the verge of pition due to the rapid rise in costs, Anta (2020.HK) has chosen to eliminate cost pressures through product upgrading and price increase.

A few days ago, Anta released the first performance report after the listing. Due to the general rise in labor costs and raw material costs, Anta's cost expenditure increased substantially last year, of which direct wage expenditure increased by 106% and raw material cost increased by 55.2%.

However, Anta increased its gross profit margin by 33.5%, as the price of footwear and clothing increased by 29% and 15% respectively.

Anta's performance data show that the company's revenue increased 1.5 times last year, breaking 3 billion yuan, and net profit growth 2.6 times, reaching 538 million yuan, 39.9% higher than the profit forecast in June last year.

According to Anta's executive director and chief operating officer Lai Shi Xian yesterday, the company's business is expected to continue to maintain strong growth through consumption promotion and domestic demand this year. Although the cost will rise further, the profit margin index will not be affected by increasing the structural upgrading of high-end products and increasing the unit price of products.

Lai Shixian even predicted that the gross profit margin of the company will continue to rise to 38% in 2008.

Although the new labor contract law was implemented at the beginning of this year, the trend of rising labor costs in manufacturing industry has been apparent since last year.

Some shoemaking enterprises in Guangdong, Fujian and other places indicate that the traditional labor intensive shoe factories with only 8% gross margins are on the brink of no profit or even closing.

This pressure is also reflected in Anta's performance report.

Anta's direct wage cost doubled last year to 120 million yuan.

"In self production, compared with last year, the increase of direct wage costs is higher than the cost of raw materials," Anta said, including the adjustment of the overall pay level, and the increase of the high-grade product line to improve the average wage level of the labourers. "Ensuring human resources stability" is increasingly becoming an important issue for manufacturing enterprises.

However, the increase in costs did not affect Anta's gross margin growth.

Last year, Anta's wholesale gross margin increased by 8.4 percentage points to 33.5%.

Anta explains that this is mainly due to increased purchases and higher average prices of more high-grade products.

Last year, the average cost of Anta footwear and clothing products increased by 14.5% and 2.3% respectively, but the average selling price increased by 29% and 15% respectively.

In addition, Anta completed its restructuring sales strategy last year, of which the proportion of Anta's clothing accessories sales increased from 36.2% in 2006 to 46.2%, while the proportion of Anta brand footwear sales decreased from 63.8% in 2006 to 53.8%.

Anta brand added 1394 new retail outlets, a net increase of 608.

For the development of 2008, Ling Shengping, chief financial officer and company secretary of Anta, said that the capital expenditure this year was about 367 million 600 thousand yuan, which was mainly used to increase production facilities and build two factories and operations centers.

At the same time, we plan to increase 7 footwear production lines, bringing the total production line to 12, which is expected to be put into operation in the second half of this year to 2009.

In addition, Lai said that Anta will pform 200 retail stores and add 800 new stores this year, so that the total number of retail stores will increase to 5300, and the number of international brand stores will increase from 170 to 230-250.