The days are not as good as before.

I'm afraid this is the majority of electrical enterprises now helpless voice. Over the years, China's electrical industry has maintained a trend of rapid growth, and a number of large and medium-sized enterprises have emerged. However, with the rising of raw material prices, labor costs and financing costs, it has become an indisputable fact that the profits of electrical enterprises generally decline.

Previously, the ''Analysis of the Economic Operation of the Electrical Industry in the First Half of 2011 ''issued by the China Electrical Equipment Industry Association showed that in the first half of 2011, my country's electrical industry generally maintained a trend of rapid growth in production and sales, and import and export trade increased significantly, but due to the industry The rise in the prices of labor, raw materials and other production factors has led to a monthly decline in profit growth.

Even in the capital market, the performance of most listed electrical companies is not satisfactory. Data show that in the first half of 2011, 113 listed companies in the-share electrical equipment industry achieved a total operating income of 156.6 billion billion yuan, an increase of 10.41 percent over the same period last year, and a net profit of 10.6 billion billion yuan, a decrease of 7.76 percent over the same period last year. The overall gross profit margin of listed companies in the industry was 20.00, down about 0.74 percentage points from the same period last year.

Production and sales are booming, but profits have fallen instead of rising-this has become an obstacle to the sustainable development of most electrical companies. From the overall point of view, it is bound to have a profound impact on the development of the entire electrical industry. To this end, this magazine will invite industry experts and scholars to analyze this situation from the perspective of industry development and enterprise management, so that readers can pay attention to it.

With the disclosure of the first half of 2011 annual report of listed electrical companies, the financial situation of electrical enterprises in the first half of the year has gradually surfaced. Declining profits and soaring costs have once again become the industry's heaviest topic. Not only the profits of small and medium-sized electrical enterprises have declined, even the domestic leading enterprises have not got rid of the nightmare of a sharp decline in profits.

On August 5, Pinggao Electric released its first half performance report. The report shows that from January to June this year, Pinggao Electric achieved operating income of 0.682 billion yuan, a year-on-year decrease of 32.52; net profit was only 1.25 million yuan, a year-on-year decrease of 98.52; net profit attributable to ordinary shareholders of listed companies was 920000 yuan, a year-on-year decrease of 98.92%.

"The market competition with price competition as the main manifestation has intensified. In addition, the prices of main raw materials have risen, labor costs have remained high, the company's cost pressure is huge, operating risks have increased, and operating effects have become more uncertain." Coincidentally, in the first half of the year, China Xidian Group achieved a total operating income of 5.08 billion yuan, down 23.7 percent from the same period last year, and a total profit of 0.07 billion yuan, down 89 percent from the same period last year.

The decline in profits has become a common situation in the industry. "In the past two years, the production capacity of the industry has expanded by more than 20%, but the profits of most companies have declined significantly compared with before. It is a common phenomenon that profits have fallen by 20% to 30%." Hu Shuqing, deputy director of the Major Equipment Office of the China Machinery Industry Federation, revealed in an interview with our reporter that declining market demand, intensified competition, diving product prices, and substantial increases in business operating costs are the main factors leading to this situation.

Soaring costs

"compared with the lack of work in the 2008 financial crisis, the current situation is that enterprises can receive orders, but operating profits continue to decline compared with last year." The person in charge of an electrical manufacturing enterprise in Jiangsu can not help but sigh.

Frozen three feet is not a day's cold. Data show that, in fact, as early as 2005, the overall gross profit margin of the domestic power equipment manufacturing industry has shown a downward trend year by year. toTransformerFor the industry, the average profit margin was 22% 10 years ago, but now it is only about 5% to 6%.

However, in contrast to the decline in profits, it is the continued optimism of the equipment industry. According to the China Electrical Equipment Industry Association's "Analysis of the Economic Operation of the Electrical Industry in the First Half of 2011", the growth rate of production and sales of the electrical industry in the first half of 2011 was about 31%, with obvious characteristics of rapid growth. From January to June, the total industrial output value was 2037.221 billion yuan, up 31.40 percent year-on-year, and the industrial sales value was 1972.433 billion yuan, up 31.05 percent year-on-year.

Why are production and sales booming, but profits continue to decline? In an interview with reporters, some enterprises believe that the rise in the prices of factors of production, workers' wages, copper and iron and other raw material prices fluctuate sharply, become an important driver of the decline in operating profits.

As we all know, in China's electrical industry, most areas belong to raw material-intensive products, for steel, copper, aluminum and other raw materials demand is great, including aluminum, copper, silicon steel sheet and other raw materials inLow-voltage electrical apparatus,Wire and cableThe cost composition of basic electrical products such as transformers and small and medium-sized motors accounts for a large proportion. For example, in wire and cable products, raw materials account for more than 80% of the total cost; in transformer products, material costs account for more than 70% of the total cost. Therefore, the rise in raw material prices will greatly increase the cost of products, which in turn will affect the profits of the entire industry.

At the same time, because large-scale equipment is signed in advance of the production contract and agreed price, production enterprises can only start production according to the contract, while ensuring delivery on schedule, product prices are almost impossible to increase. The double pressure of upstream and downstream squeezes the electrical industry in the middle link at the same time, which eventually leads to the "market priceless" of the electrical industry. Although the production and sales are strong, the profit margin is declining.

Taking copper price as an example, the weighted average price of Shanghai Futures Exchange in June 2010 was 53077 yuan/ton, and in June this year it was 67700 yuan/ton, up 27.5 percent. In addition, the price of cold-rolled silicon steel, taking the 30Q130 brand produced by WISCO as an example, was 19800 yuan/ton in June 2010 and 22000 yuan/ton in June this year, up 11.1 percent.

According to industry calculations, the domestic silicon steel price increase of 10%, will make the transformer cost increased by 3.8; copper, aluminum price increase of 15%, the cost of the transformer impact were 4.2 and 4.5. This, coupled with rising energy prices, transportation costs, and human resource costs, has driven further increases in business costs.

"The domestic and international macroeconomic environment determines that China's de facto 'inflation' situation will not ease for some time to come. The price of raw materials in the electrical industry will rise higher and higher, although occasionally down, but the continued price of raw materials has become an indisputable fact." Zhao Zongchang, general manager of Beijing Sanlian Transformer Co., Ltd., said that at present, enterprises do not have any tricks to deal with the pressure of rising prices of raw materials, and the only way is to reduce their profits. He said that in the situation of soaring raw materials, the manufacturers who can maintain are the winners.

In addition, the increase in labor costs has also led to an increase in the funding gap for enterprises. In recent years, due to factors such as industrial gradient transfer, changes in the employment concept of the new labor force, and the increase in the cost of living where the company is located, it has caused a serious labor shortage in the Yangtze River Delta and the Pearl River Delta. Enterprise labor costs have risen sharply. According to statistics, this year, the minimum wage of Chinese enterprises has increased by an average of 26%, and the wages of workers have generally increased by 15% to 20%.

"In order to better retain workers, companies are now increasing their benefits, which has further diluted their meager profits." According to Xue Wenfeng, president of Changjiang Electric Group, the salary of a piece-rate worker in the company has risen from 2100-2200 yuan/month in the first half of last year to the current 2600-2700 yuan/month, and the expenses such as insurance premiums and overtime subsidies are also higher than last year. Xue Wenfeng calculated that the combined labor costs of miscellaneous labor have increased by about 30% over the same period last year. "In fact, our overall sales in the first half of this year were good. The total output value increased by 30% year-on-year, but the profit decreased by 5% year-on-year."

According to Pei Changhong, director of the Institute of Economics of the Chinese Academy of Social Sciences, in addition to the above problems, so far, the amount of new credit for small and medium-sized enterprises in China has decreased by 48.6 billion yuan, but the number of small and medium-sized enterprises, including electrical enterprises, has increased by 20,000. The situation of "more monks and less porridge" continues, resulting in the reduction of loanable funds of commercial banks, the rise of interest, and the financing cost of enterprises is pushed up again.

Make money at a loss

To get out of the above dilemma, the answer seems to be very simple on the surface-in the face of rising raw material prices, labor costs, and financing costs, can companies pass on cost pressures through product price increases?

However, for the power equipment manufacturing industry, product sales prices are difficult to increase reasonably. In fact, as early as 2005, in the face of soaring raw material prices, 145 domestic transformer companies gathered in Guiyang to form a "price alliance" and announced that from April 1 of that year, the price of transformer products will be increased in an all-round way, with a maximum increase of 30%.

However, this "price alliance", which was widely concerned by the industry, collapsed without a sound soon afterwards. According to people familiar with the matter, the collapse of the transformer price alliance is due to the increasingly fierce market competition, large transformer companies first tore up the agreement and took the lead in bidding for users to lower the price of medium voltage products.

"With the serious overcapacity in some areas of the industry in recent years, the market competition is becoming increasingly fierce, and the situation of price reduction is quite common. Some power equipment manufacturing enterprises have suffered serious losses." The above informed sources told reporters.

In this process, the lowest price winning principle implemented by the user department in the bidding of power equipment has undoubtedly played a role in fueling the flames.

"The principle of winning the bid at the lowest price is now debatable. It is understandable that users choose high-quality and low-cost products, but blindly pursuing the lowest price can only disrupt the order of competition in the equipment market. In order to win the bid, companies have repeatedly lowered prices, and the quality of products is difficult to guarantee. Can you imagine a tender down, the final product in the price is only the price of raw materials?! However, in some national key projects, some companies are still flocking to the business of" losing money and making money "for the sake of performance." The person in charge of a leading power transmission and transformation enterprise in China complained to the reporter.

At present, the legislative intent and basic principle of China's Bidding Law is to win the bid at a reasonable low price, which clearly stipulates that the winning bidder should be able to meet the substantive requirements of the bidding documents, and the lowest bid price after evaluation, except where the bid price is lower than the cost. There are also a series of prohibitions in our laws and regulations on bidding competition below cost.

In this regard, some industry experts said in an interview with reporters that in the field of power equipment bidding, although bidding competition below the cost price is rare, due to the large number of enterprises in recent years, some small and medium-sized enterprises often lower the product price when participating in the bidding. Even if these enterprises fail to win the bid as expected, they also disrupt the whole price system, As a result, it is difficult for the winning enterprises to have reasonable profit space."After the product price is lowered, the next time similar equipment is invited for bidding, some enterprises have to lower the product price again on the original basis in order to win the bid. This is also another important factor leading to the continuous decline in the profit margin of some enterprises in the power equipment industry, especially in the field of power transmission and transformation." The person in charge of the above-mentioned enterprises told reporters.

However, in Hu Shuqing's view, winning the bid at a low price is undoubtedly one of the factors leading to the decline of industry profits, but over the years, the overcapacity caused by blind investment in the industry and the disorderly competition in the industry are more worthy of the industry's vigilance.

During the interview, the reporter learned that in recent years, on the one hand, due to the low investment threshold, a large number of enterprises have poured in, resulting in too many enterprises in the industry. It is understood that at present, only the production enterprises of power transformers are conservatively estimated to be more than 1,000, and the number of large and small enterprises in the wire and cable industry has reached nearly 10,000. Production capacity exceeds market demand and there is a serious overcapacity.

On the other hand, due to the low threshold, not only the concentration of the industry is getting lower and lower, but also some enterprises that do not have the necessary means of production capacity, quality control and testing can mix in the industry, become the source of fake and shoddy, shoddy, shoddy and shoddy products, and disturb the market competition order by lowering the sales price, Intensifying the disorderly competition in the industry, it also eventually led to a decline in industry profit margins.

Tightening market

Over the years, the power equipment industry is one of the industries driven by investment. However, with the gradual implementation of national key large-scale projects, the slowdown in investment has gradually affected power equipment companies. In fact, there are several large-scale leading companies.

According to the information disclosed by TBEA in the first half of 2011, the company's comprehensive gross profit margin was 22.22, a year-on-year decrease of 0.40 percentage points. The main reason for the decline in gross profit margin was intensified market competition, and the prices of major raw materials were high and fluctuated widely. The company's operations are facing greater pressure and challenges.

Among them, transformer revenue fell faster. In the first half of this year, TBEA transformers achieved operating income of 4.34 billion billion yuan, a year-on-year decrease of 14.25, mainly due to the slowdown in power investment and fierce market competition. Gross profit margin was 26.83, a year-on-year decrease of 1.46 percentage points, mainly due to intensified market competition in the power transmission and transformation industry and fluctuations in raw material costs.

In this regard, industry analysts believe that as far as the power transmission and transformation industry is concerned, the prosperity of high voltage and medium and low voltage equipment will be significantly differentiated in the future.

The reason is that in recent years, the construction of the backbone network (220-750 kV) has been relatively perfect, and the investment speed has slowed down. Data show that from January to June 2011, the completed investment in power grid infrastructure was 129 billion billion yuan, an increase of 6.26 percent over the same period last year. However, investment in the construction of trunk lines of 220 kV and above has slowed down. As of the end of June, the cumulative capacity of newly added substation equipment of 220 kV and above was 89.33 million kVA, a year-on-year decrease of 8.6 million kVA.

At the same time, companies such as TBEA and Pinggao have previously benefited from UHV projects, but the approval of UHV exchange projects in the first half of this year has been slower. Although the State Grid strives to approve seven UHV AC and DC lines at the work meeting at the beginning of the year, from the actual situation, only the four projects of Ximeng-Nanjing, Mengxi-Changsha, Xiluodu-Zhexi, and Hami-Zhengzhou have been approved by the National Development and Reform Commission to carry out preliminary work, which also affects the performance of power transmission and transformation enterprises to a certain extent.

in transformers andSwitchIn the field of equipment, such as production and delivery, there is a lag effect compared to the time of order acquisition, which also causes a decline in current profits to some extent. "Most of the large-scale engineering contracts that focused on sales in the first half of 2010 were signed in 2009, when the quantity and price of products were at a high level. However, the orders for revenue in the first half of 2011 were mainly concentrated in the orders obtained in the second half of 2010. At that time, the market competition was mainly manifested in price competition. The industry had relatively excess capacity, and the unit prices of transformers, switches and other products were greatly reduced." Industry analysts said.

Zhang Lei, a researcher at Tianxiang Investment Consulting Co., Ltd., said that from the perspective of power generation, the five major power generation groups are currently suffering serious losses.new energyVarious sub-industries are showing a trend of differentiation: the overall high growth of the wind power industry has temporarily come to an end, industry competition has intensified and financing costs have increased, resulting in a general decline in company performance; the photovoltaic industry is still in a state of inventory digestion, and revenue continues to grow in the first half of the year, but profitability Declining trend; the timing of the restart of nuclear power approval still needs to be observed; hydropower will become the main force to replace fossil fuels. "Revenue and profits of primary equipment at the transmission and distribution end continue to decline under the pressure of high raw material and labor costs, soaring financial expenses and oversupply in the industry."

In view of the current situation of the industry, some experts in the industry believe that the electrical industry should change the concept of "emphasizing share, neglecting profit" and "pursuing economies of scale" in the past, and attach importance to improving the profits of enterprises.

Some experts said that if companies want to get rid of the current difficulties caused by rising raw material prices and increasing labor costs, they must grasp the technological trends of the industry, keep up with the development research and trends of new technologies, and continuously improve their own design and development capabilities to make them Have the ability to participate in the product development stage of downstream customers, and realize synchronous design and development with customers. It is necessary to have perfect hardware requirements for product development, especially the evaluation means and management methods of product reliability. Only in this way can we ensure that the product quality meets the needs of customers and have the conditions to compete with excellent enterprises.

Regarding the current substantial price increase of raw materials, the majority of enterprises in the electrical industry must treat it rationally and take effective countermeasures, by improving process and product design, strengthening enterprise production management, striving to increase the utilization rate of raw materials, reducing consumption, and trying to digest the price increase Factors; actively adjust product structure, increase product added value and brand added value through technological upgrading and management modernization, and take the road of quality and efficiency development.

Expert opinion

Wei Jie: Looking for a Breakthrough in Modern Manufacturing

Recently, small and medium-sized enterprises have encountered two most important problems, one is financing difficulties and rising financing costs; the other is rising labor costs. From an economic point of view, these two cost increases are normal. The question is whether this cost increase can be transferred through price increases: if the increase in financing costs and labor costs of enterprises can be transferred through the increase in sales prices, it means There is no problem with the economy; on the contrary, if these two cost increases cannot be transferred to prices, resulting in erosion of corporate profits, this shows that there is a problem.

This problem is not unique to China. Many countries have appeared at this stage of development in history, so economics has also studied it. Judging from past experience, there are generally two ways to solve this problem. The first method is for the state to come forward through tax cuts and financial innovation to resolve the pressure on labor costs and financing costs, so as to ensure a reasonable profit level for enterprises while the two costs are still rising. Will China do this? On the one hand, from the current situation, financial innovation has only enriched financing channels and moderately alleviated the problem of financing difficulties, but the cost of financing has not come down; on the other hand, the possibility of tax cuts is not too great, and the tax threshold has been raised by 500 yuan from 3000 yuan, which has taken a long time, not to mention the substantial tax cuts for so many small and medium-sized enterprises. That is to say, it is impossible for the state to ease the cost pressure of enterprises through financial innovation and so-called tax cuts in the short term, and this way out has been blocked.