Hailide Seeks Profits through Product Differentiation      

Zhejiang Hailide New Material Co., Ltd. (Hailide, SZ: 002206), located in Haining City, Zhejiang Province, is mainly engaged in the production and sales of geogrid materials, PVC-coated materials, roofing materials, polyester industrial filament, polyester chips and macromolecular materials. Its production capacity of polyester industrial filament reaches 70 000 t/a. It is the third biggest polyester filament producer in China and the eighth biggest in the world. Its most competitive product is high modulus low shrinkage (HMLS) polyester industrial filament used to make tire cord fabric.

Increase profits during the global economic crisis    

The rapid expansion of the polyester fiber industry has aggravated the market competition of common polyester fibers. Due to the global financial crisis, the average operating rate of polyester fiber plants has declined but their losses have increased since the beginning of 2009. However, because Hailide has long-term stable cooperative relationships with many large auto accessories companies at home and abroad, the fierce market competition and the global economic crises have not had much impact on its sales. In the first half of 2009, this company's sales revenue was RMB438 million, down 17.66% year on year, but its net profit was RMB60.87 million, up 46.82% year on year. The gross profit rates of its polyester industrial filament and light-box fabric increased 7.54% and 11.26%, respectively, year on year. The company explains that in the first half of 2009, the drop of its sales revenue was caused by the falling prices of its products, but the prices of raw materials fell more, so the gross profit rates of its products increased. Recently, Hailide issued a report that due to the growth of its high-end polyester industrial filament business and its wide light-box fabric business as well as the year-on-year decline in the prices of raw materials, the company's net profit in the first three quarters of 2009 will be 50% to 70% more than the net profit, RMB61.21 million, obtained during the same period in 2008.

Product differentiation is the key to the profit growth   

Common polyester industrial filament producers currently face greater difficulties, having little profit or even suffering losses. But China's demand for high-performance polyester industrial filament is satisfied by import. For enterprises with a high degree of product differentiation, due to higher technical barriers, they can maintain a reasonable gross profit rate and have greater room for development. Hailide insists on the product differentiation strategy. Its product quality is higher than that of other companies in this industry, and its product prices are also higher than average. At present, the price of its high-end polyester industrial filament is about 20% higher than that of the common one. This company's key products, such as HMLS (high module low shrinkage) polyester industrial filament, wear-proof filament and colored filament, have virtually no competition in the domestic market.
   The company has a relatively stable output of common polyester industrial filament, but it has constantly increased its high-end polyester industrial filament capacity. After its 25 000 t/a high-end industrial filament plant was put into production in June 2009, the company's polyester industrial filament capacity has reached 70 000 t/a, and its product differentiation rate has increased from 60% to 74%. In addition, the company will build a 50 000 t/a differentiated industrial filament plant and a 120 000 t/a polyester chip plant in the second quarter of 2010. At that time, the company's polyester industrial filament capacity will reach 120 000 t/a, and its product differentiation rate will reach 85%. Self-produced polyester chips can ensure the supply of raw materials for the company's production.
   In June 2009, four new products developed by the company were assessed by experts to lead in China. These products are polyester industrial filament for vehicle safety belts, polyester industrial filament for airbags, anti-bacterial rubberized fabric and self-adhesive glass fiber geogrid.
  The company's light-box fabric business focuses on high-end wide light-box fabric products. The demand for such fabric is vigorous at home and abroad. Because the company produces major raw materials, such as common polyester filament and PVC films by itself, it can contain product costs.

Demand for polyester industrial filament will continue to increase in the future  

The automotive industry drives up the demand for polyester industrial filament. Polyester industrial filament is mainly used for light-box fabric, tire cord fabric, seat belts and transport fabric, which are related to the automotive, transportation and advertising industries.
   In the first half of 2009, China's total vehicle sales reached 6.23 million, up 16.40% year on year. This has brought about a strong demand for tire cord fabric and seat belts and further increased the demand for polyester industrial filament. In the future, with the popularization of vehicle compartment curtain, freight vehicle strapping tape and geotextile materials for the construction of highways and railways, the demand for polyester industrial filament will be greatly enhanced. The company predicts that after the obvious revival of the world economy, the newly added polyester industrial filament capacity will not be able to keep up with the growth of demand for such filament, so in the second half of 2010 or the whole year of 2011, the polyester industrial filament sector will re-enter a boom cycle.