A few days ago, the "Finance Number One" public account published the article "Top Ten Involved Industries in 2022". The author used the proportion of loss-making companies among listed companies in a certain industry as an indicator to measure the "degree of involution" of the industry. , and evaluated the top ten involved industries in 2022. It is worth noting that in this ranking, the ceramic industry ranked fourth with an "involution degree" of 75%.
The ceramic industry is under great operating pressure
6 of the 8 sample companies suffered losses in the first half of the year
The article "Top Ten Involved Industries in 2022" believes that when the development of an industry or a group is restricted, its survival status is poor, and competition becomes increasingly fierce, an involution situation will form. If a certain industry has a high proportion of loss-making companies, it means that the development of the industry has encountered difficulties. If a large proportion of companies in an industry struggle to make a profit, the industry can be considered very "involved." Moreover, the greater the proportion of loss-making companies, the greater the volume of the industry.
Listed companies are the best business representatives in various industries. Therefore, the author uses the proportion of loss-making companies among listed companies in a certain industry as an indicator to measure the "degree of involution" of the industry. The calculation formula of "involution degree" is: involution degree = number of listed companies with losses/total number of listed companies in the industry.
For the ceramic industry, this article selected 8 sample companies including Dongpeng Holdings, Diou Home Furnishing, Mona Lisa, Dow Technology, etc. In the first half of 2022, 6 of these 8 sample companies had negative operating profits, and the "involution degree" was 75%. Compared with the same period in 2021 (the "involution degree" was 25%), the industry's "involution degree" "Twice as much.
The article analyzes three reasons for the involution of the ceramic industry:
First, the ceramic industry is closely related to the real estate industry. The default risk of real estate companies has increased during the current period, and many ceramic companies have taken the initiative to shrink risky orders.
Second, some real estate companiesIndustry liquidity problems and debt defaults have led to increased credit impairment losses for many ceramic companies.
Third, the prices of energy and some raw materials continue to run at high levels.
Judging from the above reasons, the ceramic industry will still be under greater operating pressure in the short term. At present, the concentration of the ceramic industry is low. With the impact of environmental protection policies, rising manufacturing costs, upgraded investment thresholds and other factors, the concentration of the industry is expected to increase.
Household enterprises that have been hit hard have reduced risk orders
Gross profit margin declines year by year as costs rise
The three reasons for the involution of the ceramic industry mentioned above can actually be considered as the main factors affecting the performance losses of listed ceramic companies in the first half of 2022.
In the first half of this year, affected by the downturn and regulation of the real estate industry, real estate companies have experienced capital flow problems one after another, and the number of real estate companies that publicly defaulted on their debts has continued to increase. As upstream companies, ceramic companies have been involved, and many listed ceramic companies have made credit impairment losses on real estate companies. Relevant statistics show that since last year, five ceramic companies have made impairment losses of 3.48 billion yuan against many real estate companies.
At the same time, as the credit risk of real estate companies increases, the expected default risk will expand. Based on risk prevention and control, many ceramic companies have adopted cautious strategies for their fine decoration housing engineering business and proactively reduced orders from real estate customers with higher risks. For example, listed ceramic companies such as Mona Lisa, Dongpeng Holdings, and Diou Home Furnishings are all expected to start operations in 2022. The semi-annual report mentioned the strategy of proactively reducing risk orders. For ceramic companies that rely heavily on real estate engineering business, this action is tantamount to "cutting off the meat and stopping losses". However, it also greatly affected the company's overall operating income in the first half of the year. It is understood that Mona Lisa’s engineering strategic business sales revenue in the first half of the year was 1.253 billion yuan, a year-on-year decrease of 15.56%.
In addition, since this year, upstream raw material and energy prices have continued to run at high levels, ceramic companies' operating costs have continued to rise, and gross profit margins have declined year after year. Data shows that the gross profit margin of the ceramic tile sector of three listed ceramic companies in the ceramic industry will remain at 25%-31% in 2021. However, in the first half of this year, some ceramic companies have fallen to around 15%.
Overall, in the first half of this year, 3 of the 7 listed ceramic companies with ceramic tile business suffered losses.Compared with the same period in 2021, the revenue and net profit of almost all listed ceramic companies have declined significantly.
The essence of involution is vicious competition
Where is the future of the ceramic industry?
Essentially, "involution" means that excessive competition leads to meaningless internal friction, or even vicious competition. In the ceramic industry, the most direct manifestation of "involution" is vicious price competition. Whether at the terminal or upstream manufacturers, there is an endless phenomenon of product prices getting lower and lower. As soon as new processes and new colors come out, the entire industry follows suit, and the quality is almost the same. As a result, the price of new products is reduced within a few months. Sell even if the cost is reduced to the red line. In the past two years, the ceramic industry has gradually been "bad" due to the "price war", including star diamond glazed ceramic tiles, rock slabs, and 750×1500mm ceramic tiles, including plain-colored tiles that are very popular this year. Ceramic tiles are becoming less and less profitable and gross profit margins are getting lower and lower not only because of high operating costs, but also because of inappropriate product price planning by ceramic companies.
In addition to price, the involution of the ceramic industry is also reflected in all aspects of corporate management such as products, marketing, and services. Today you do a linkage promotion, and tomorrow I will also come to the brand to put prices on it. If you subsidize tens of millions of dollars in investment, I will decorate the store for free. If you organize designer activities, I will promote a designer competition... Although this year due to the decline in market conditions, many ceramic companies are unwilling to "speak out." , but they all started an "anniversary celebration" in unison. Does the brand really need to establish an image and actively speak out, or is it just a "little trouble" to follow the crowd?
Bian Cheng, chairman of Keda Manufacturing, also pointed out in an interview with the media, “Every industry in our country is too involved. Almost every industry will end up with vicious competition. If there is no relative survival of the fittest, there will be relative monopoly. , every industry must die, without exception. Especially private enterprises often say that they would rather not make money than lose the market.What do you do with money? If everyone has this mentality, then this industry will be doomed. ”
Obviously, excessive involution leads to internal friction in the industry and shakes the foundation of the enterprise. Ceramic enterprises should recognize the essence of brand development, actively expand marketing innovation ideas, and discover new growth opportunities for the enterprise.
