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How does the equipment manufacturing industry respond to the market's "winter"

How does the equipment manufacturing industry respond to the market's "winter"

Industry news
2018/09/28 08:52
Under the new normal, China's economy is shifting from high-speed growth to medium-high-speed growth.

Under the new normal, China's economy is shifting from high-speed growth to medium-high-speed growth. Equipment manufacturing enterprises are faced with the dual challenges brought by the reduction of external market demand and their own transformation and upgrading. How should state-owned large-scale equipment manufacturers cope with new challenges and spend the market? "Cold Winter"? Shenyang Blower Group Co., Ltd. (hereinafter referred to as "Shengu Group") Recently, Su Yongqiang, chairman of the board of directors, said in an interview with reporters that in the face of falling orders and increasingly tight capital chains, Shengu Group is accelerating the pace of reform and innovation. Through the transformation of development mode, new product research and development, and expansion of export “troika” to drive the operation and development of the group, explore a road to “spring” in the “cold winter”.

- Orders are falling, funds are tight, and equipment manufacturing companies feel "cold winter"

Since 2015, as the economic growth rate has continued to slow down, many enterprises, especially industrial enterprises, have suffered a large impact on their income and profits. In January-February 2015, the added value of industrial enterprises above designated size increased by 6.8% year-on-year, 1.8 percentage points lower than that of the same period of last year. The total profits of industrial enterprises above designated size reached 745.24 billion yuan, down 4.2% year-on-year. As a pillar industry of the national economy, the impact of the equipment manufacturing industry under the “new normal” of the economy is more obvious. As an important enterprise in equipment manufacturing, Shengu Group has a deep feeling for this.

“Because of overcapacity and weak investment, the demand for corporate orders has fallen sharply in the recent past. In the first quarter of 2015, our orders fell by 19.8%.” Su Yongqiang, chairman of the Shengu Group, said, “The first quarter’s return fell by 27.7. %, sales revenue fell by 5.15%."

In addition to the Drum Group, other equipment manufacturers are also facing a “cold winter” market with reduced income or profits. The data shows that the listed company Shaanxi Drum Power achieved operating income of 4.86 billion yuan in 2014, down 22.7% year-on-year, and net profit attributable to shareholders of listed companies was 524 million yuan, down 42.8% year-on-year; Hangyang shares realized attributable to shareholders of listed companies in 2014 Net profit was 135 million yuan, down 41.93% year-on-year, and fell for three consecutive years; Hangzhou Steamship achieved operating income of 3.72 billion yuan in 2014, down 26.5% year-on-year; net profit attributable to shareholders of the parent company was 350 million yuan, down 46.18 year-on-year. %, the decline was nearly 50%, and fell for two consecutive years.

Reduced demand and reduced profits have left equipment manufacturers feeling cool in the spring. In addition, the operating costs of the company have remained high. "Human costs are too high. We are state-owned enterprises and shoulder social responsibilities. Even if the situation is difficult, we can't lay off employees, we can't reduce wages, and we can face the financial costs of bank loans. Companies face great financial and cost pressures. Su Yongqiang said.

In addition to state-owned enterprises such as the Shengu Group, large and medium-sized enterprises seem to face widespread pressure on rising labor costs. Ji Wei, chairman and general manager of Jintongling, said at the company's 2014 annual performance briefing that the company's labor cost increased rapidly in 2014, which had a certain impact on the company's high-end product production and profit margin.

- Accelerate transformation, strengthen research and development, increase exports, and seek development through innovation

Despite the difficulties faced by the company's business development, Shengu Group insisted on finding a breakthrough in the difficulties, and found a sustainable development path for enterprises through various measures such as transformation and development, strengthening innovation and research and development, and increasing product exports.

Explore business model innovation, transforming from traditional equipment manufacturers to new manufacturing service providers.

The Drum Group began to seek transformation since 2008. At present, the Group's service companies include customer service companies, automatic control companies, measurement and control technology companies, Northern computer companies, transportation companies, import and export companies and Hong Kong branches.

“Our customer service company has established a product lifecycle service strategy, responsible for spare parts, maintenance, unit installation, unit upgrade, maintenance service, remote online monitoring and fault diagnosis analysis, one-stop service turnkey project, overseas service And service and technical consulting services in 10 areas; automatic control company sales revenue reached 500 million last year; remote service center has been rebuilt, just opened on March 27. These 7 companies achieved total revenue of 1.66 billion yuan last year. The profit is 290 million yuan, accounting for 78% of the group's full-year profit. The effect of the transformation is still relatively obvious." Su Yongqiang said.

Strengthen R&D investment and continuously realize technological innovation and breakthroughs.

Despite the increasing pressure on the operation of the Nangu Group in recent years, its product development and technological innovation have not stopped. In 2014, the company’s R&D investment accounted for 5.4% of its sales revenue.

“Last year, we completed 157 scientific research projects, won 28 science and technology awards, and 43 patents, which is also the highest in history, including 23 invention patents, which is the sum of the past five years. In the next five years, we have also set up many research projects. It is planned to invest at least 2 billion yuan for R&D. During the 13th Five-Year Plan, we have also planned more than 200 major projects.” Su Yongqiang said, “The market always favors those who are prepared. We hold this belief and increase scientific research. We plan to invest more than 3 billion yuan this year to build a test bed."

"The more the economy declines, the more it needs to strengthen R&D. Even if the loans and liabilities are high, the company can't drop the R&D." The Drum Group's premature business development concept has made the market see its development potential full of "positive energy."

Converting the arena, expanding exports, and opening up opportunities to overseas markets.

In recent years, Shengu Group has increased its export efforts and actively explored overseas markets. At present, the products that have been sold overseas include various types of turbomachinery equipment, pumps and reciprocating compressors, which are mainly exported to countries and regions such as India and the Middle East. .

In 2014, Shengu Group integrated the international business department and formulated overseas development strategies and targets – with compressors as the core and pumps as the auxiliary, pooling resources and focusing on advancement. In April 2014, an advanced turbomachinery seminar was held in Iran to introduce China's most advanced turbine equipment to Iran, which effectively expanded the Middle East market.

“Last year we exported 33 sets of compressors, and our exports increased by 2.7 times. In the first two months of this year, exports increased by 85.5%. To some extent, we have made up for the bad situation of domestic orders.” Su Yongqiang said, “So, in 2015, we It plans to set up offices in the Middle East, South America and Russia to increase exports."

It is understood that the Shengu Group plans to expand its strategic partners in the short-term based on the indirect export strategy of borrowing ships to the sea, and work closely with domestic large enterprises to jointly explore overseas markets, and use this as an opportunity to promote independent exports as a medium- and long-term leading strategy. In the future, Shengu will gradually shift its development focus to the international market, establish a number of market centers in Asia-Pacific, South America, and the Middle East, gradually increase its international market share, and strive to achieve an export value of 500-700 million US dollars by 2020.

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