Jiangnan Group

About Us

Chairman Statement

Group’s philosophy

As one of the best known large scale wires and cables manufacturer and marketing enterprise, adhering to honesty and hard working, Jiangnan Group aims to develop vigorously a better industry environment, to be among world-class brands and best international enterprises, to create social wealth, to realize staff value and to gain best return to the shareholders.

Business Environment

In 2019, the national economy in China declined as compared to 2018. According to the National Bureau of Statistics of China, in 2019, China’s gross domestic product (“GDP”) grew by 6.1% over that in 2018 to RMB99.1 trillion, but its growth rate decreased by 0.5 percentage points from 6.6% in 2018, which was the lowest rate of GDP growth in China in last 29 years. During 2019, China’s manufacturing purchasing managers’ indices (“PMI”) were below 50% for eight months compared to only one month in 2018, which indicated a slowdown in the manufacturing economy in China. National fixed asset investments increased by 5.4% in 2019 over that in 2018 to RMB55.1 trillion, representing a decrease of 0.5 percentage points in their growth rate as compared with 5.9% in 2018. The Chinese economy has experienced downward pressure in 2019, and the demand for cables has also been affected as the cable industry in China is closely related to the economic conditions of China.

In terms of electricity consumption, according to the statistics of the Industry Development and Environmental Resources Division of the China Electricity Council, a joint organisation set up by power enterprises and institutions in China under the approval of the State Council, the total electricity consumption of the entire nation was 7,225.5 billion kilowatt-hours in 2019, representing an increase of 4.5% over that in 2018. The electricity consumption growth rate decreased by 4.0 percentage points over that in 2018, but still representing a continuous increase in electricity consumption. In respect of the supply and transmission of electricity, the national infrastructure production capacity was 101.73 million kilowatts, which was lower than that in 2018 by 29.45 million kilowatts. In 2019, the major power generation enterprises in China completed investments in respect of power supply works of RMB313.9 billion, which were 12.6% more than those in 2018. Hydropower projects were the main driving force in 2019 among them. The investments completed under the national grid project amounted to RMB485.6 billion in 2019, representing a significant decrease of 9.6% of those in 2018. Among such completed investments, the investments made by the State Grid Corporation of China (“SGCC”) in power grids in 2019 amounted to RMB 447.3 billion, which represented a decrease of 8.5% of those in 2018. The increase in investments in respect of power supply works countervailed the decline in SGCC’s investment and contributed to the increase in the Group’s sales from its customers in the energy sector in 2019.

According to the National Bureau of Statistics of China, national infrastructure investments (excluding the production and supply of electricity, heat, gas and water) in 2019 increased by 3.8% over those in 2018, which was mainly driven by the 9.0% growth in the investments in the road transportation industry, 17.4% growth in investment in the information transmission industry and 37.2% growth in investment in the ecological protection and environmental governance industries, which has a positive impact on boosting the demand for both general and special power cables.

In order to stabilise property prices and maintain healthy development of the property market and implement the China government regulatory policy on “housing for living, not for speculation”, local governments in the PRC introduced various measures according to the relevant situations in 2019, such as restrictions on the purchase of properties, mortgages and sale of properties. Banks further tightened the money supply, and the supply and demand of the property market gradually returned to rationality. Real estate investments still remained stable with a mild increase in 2019. According to the National Bureau of Statistics of China, in 2019, the floor space of commodity housing sold in China slightly decreased by 0.1% of that in 2018 to approximately 1,710 million square metres but the sales increased by 6.5% to approximately RMB16.0 trillion Investments in real estate development in China reached approximately RMB13.2 trillion in 2019, representing an increase of 9.9% with 0.4 percentage points higher over those in the year of 2018. In 2019, the floor space of commodity housing under development increased by 8.5% over that in 2018 to approximately 2,270 million square metres, while the floor space of commodity housing completed increased by 2.6% over that in 2018 to approximately 960 million square metres. At the end of 2019, the floor space of commodity housing under construction by developers reached approximately 8,940 million square metres, representing an increase of 8.7% as compared with that as at the end of 2018. The land areas purchased by real estate developers in 2019 amounted to approximately 260 million square metres, representing a decrease of 11.4% of that in 2018. Due to the slow recovery of receivables from real estate enterprises in general, the Group adopted a more conservative attitude in selling of its products to real estate sector, curbing the growth of the Group’s sales in the sector.

In the first quarter of 2019, the Chinese economy stabilised in stages, but market risk appetite picked up significantly. Copper prices rebounded sharply following the recovery of copper demand from downstream operations. Shanghai copper price peaked at RMB 50,810 per tonne in early March 2019, and copper price in London Metal Exchange (“LME”) reached maximum at USD 6,608.5 per tonne. The Political Bureau Meeting of the Central Committee of the Communist Party of China held in April 2019 repeated the policy of the deleveraging, follow-by the Sino-US trade tension intensified, and a number of economic data led by the official manufacturing PMI showed a significant decline, coupled with the underperforming of certain copper downstream industries, such as automobile and electrical appliance, LME copper and Shanghai copper stocks began to accumulate. Copper prices plummeted in the second quarter of 2019. In the third quarter of 2019, the overall macro economic atmosphere tended to be pessimistic, but the LME copper price bottomed out all the way. In September 2019, the weak copper market began to bounce back. On the one hand, the market regarded the domestic counter-cyclical regulation as a positive signal. On the other hand, the riot in Chile, the largest copper exporting country, in October 2019 raised investors’ concerns about reducing copper supply, and the copper price found a support. The average price of copper on the LME in 2019 was US$6,006 per tonne, which was 7.9% lower than that in 2018. The average price of aluminum on the LME in 2019 was US$1,321 per tonne, which was 21.0% lower than that in 2018. As the Group price its products on a cost-plus basis and the majority of its products use copper as a raw material, the decline in copper prices has caused the price of the Group’s products declined, which affected the revenue growth of the Group for the year under review.

Business Review

Despite the overall economic downturn in China in 2019, numerous competitors with identical features in most of the products and fierce competition in the market, the Group, with its more than 30 years of experience in the industry and its self-innovation capabilities, recorded a turnover of approximately RMB14,524 million, representing an increase of approximately 7.4% as compared with that in 2018. Yearly turnover kept growing for four consecutive years.

In 2019, the domestic and global macroeconomic landscapes have brought about severe challenges to the Group’s development. On 22 March 2018, the President of the United States (“the US”) signed a presidential memorandum, which, pursuant to the results of the US Section 301 Investigation, imposed an extensive and heavy levy of tariffs on China’s exports to the US and restricted investments, mergers and acquisitions in the US. China and the US initiated multiple rounds of trade negotiations at the deputy national and ministerial levels since the beginning of the Sino-US trade dispute and during the dispute period. On 15 January, 2020, the “Economic and Trade Agreement between the Government of the People’s Republic of China and the Government of the United States of America” was entered into in Washington, which marked the negotiations on the Sino-US trade disputes achieved phase results. The trade disputes between the US and China, the largest and the second largest economies in the world respectively, have certainly cast a shadow over the growth of the global economy. The PRC exporters also encountered considerable difficulties. Although the total value of the Group’s exports to the US only accounted for approximately 0.1% of the Group’s turnover, the Sino-US trade disputes had adverse impact on the world’s confidence in consumption. To sustain the growth of the Group’s export sales, the Group maintains long-term cooperation with strategic customers, such as Singapore Power Works Pte Limited and Eskom Holdings SOC Limited in South Africa. Meanwhile, the Group is actively exploring potential markets in Southeast Asia and South America. Direct sales to overseas markets in 2019 recorded a growth of approximately 16.0% as compared to 2018.

In 2019, the Group increased its investment in building, transforming and expanding its technology. The Group imported a double-head 9-mold large-draw production line from Feijele in Italy, a double-twisted stranding machine, and an insulation production line for wires used in construction. The Group also purchased new machineries for the production of fire-resistant cables such as 90 extruders, 630 cable forming machines, 1250 cage twisters etc. The expansion of the Group’s production capacities will resolve its inventory backlog issue, further shorten its delivery period and increase its customer satisfaction.

In 2019, a subsidiary of the Company continued to be ranked as one of the top 500 Chinese Manufacturing Enterprises* (中國製造業企業500强), and one of the top 10 Most Competitive Cable Industry Players in China* (中國綫纜行業最具競爭力10强). The subsidiary of the Company was also ranked as one of the top 500 Chinese Private Enterprises* (2019 中國民營企業500強), one of the top 500 Chinese Manufacturing Private Enterprises* (2019中國民營企業製造業500強), one of the top 100 Jiangsu Private Enterprises* (2019江蘇民營企業100強), and one of the top 100 Jiangsu Manufacturing Private Enterprises* (2019江蘇民營企業製造業100強). The subsidiary of the Company was also awarded the titles of “Top 100 Private Enterprises in Wuxi City”* (無錫市百強民營企業), “Advanced Council Member of Jiangsu Province Quality Association”* (江蘇省質量協會先進理事單位), “Wuxi City Excellent Research and Development Institutions”*(無錫市優秀研究機構), “Excellent Enterprise in Wuxi Industry Strong City”* (無錫市產業強市優秀企業), “Wuxi Credit Demonstration Enterprise”* (無錫市信用示範企業), and “Yixing City Top Ten Tax Contribution Enterprise”* (宜興市稅收貢獻十強企業). The subsidiary of the Company also won the “National Customer Satisfaction Benchmark”* (全國用戶滿意標桿) in 2019 which is the first company in the industry to receive this honor.

* For identification purpose only

Over the recent years’, amid the keen market competition, the Group with its objective to the high-end markets domestically and overseas has managed to have developed the key technology and its peripheral products specific to low-carbon green energy-saving cables for smart grid by means of research workstations and postdoctoral research workstations for such technology and products which are awarded the first runner-up of science technology in Jiangsu Province. The aforementioned peripheral products can cope with the requirements and needs of the people’s livelihood and safety in general and in line with the current major trend of the process of intelligent, ecological and green energy-saving criteria of environmental protection. The specific research is conducted for those peripheral products in terms of their transmission manner of the electricity power, structures of conductors/electrical leads, lightweight structures of cables as well as lightweight materials, which have solved the existing technological shortcomings of poor level of reliability, structure fracture, large outer diameters and profound consumption of resources related to medium and low voltage cable products whereas the application of high voltage and ultra-high voltage electricity wires in China is greatly promoted. In addition to the research on the key technology and its peripheral products specific to low-carbon green energy-saving cables for smart grid, the Group also garners remarkable research results in terms of the research and development efforts for high voltage cables of new energy automobiles, power cables for nuclear plants, low wind pressure conducting wires and mobile low smoke halogen-free rubber jacketed flexible cables for coal mining application, which are evidenced by the 16 new products passing scientific and technical achievements evaluation, 2 products reaching the advanced international threshold level , formed 1 industry standard which is led by the Group and formed 12 national industry standards with the Group’s involvement.

Outlook and Prospects

In 2020, the Group will continue to be exposed to greater financial pressures and challenges due to the global and domestic macroeconomic conditions. In China, the Group is faced with downward pressure caused by the downturn in the macroeconomic performance resulting in the continuing trend of long-term predicaments affecting the domestic and the real economy with the challenges of structural adjustments, shortage of funds and increase in costs. The outbreak of Novel Coronavirus (“COVID-19”) in China in early 2020 triggered the central government in China to activate the level 1 response to the public health events which have caused serious adverse impacts on every sectors and industries in which the operation costs (such as labour costs, production costs and transportation costs) of companies have significantly increased, resulting in the dramatic decline in their operating results for the first quarter of 2020 owing to the interruption of business operations. Meanwhile, a widespread outbreak of COVID-19 in many other countries including South Korea, Iran, Japan, Europe and the US will undoubtedly pose severe challenges to the global economies which result in a negative impact on the Group’s revenue generating from overseas markets.

In 2020, a significant effect will also be imposed on the property markets in China under the central government policies of “housing for living, not for speculation” and the gradual implementation of such other policies launched in 2019. Despite the economic turmoil due to COVID-19, the Group considers such effect shall be temporary given that China is undergoing the industrial optimisation and upgrade and it has solid economic foundation, which will create opportunities for the business development of the Group in 2020 in the following aspects:

  • The central government in China will keep its active role to promote various financial policies and monetary policies for stabilising the economy. Thanks to the central government in China for its increase in the investments, efforts for stabilising total demands and initiatives for boosting economic growth and the ongoing implementation of different policies and initiatives including “One Belt One Road”, “Rise of central regions of China”, “Development of western regions of China”, “revitalization of north-eastern regions of China”, “priority of development for eastern regions of China” as well as establishing Yangtze River Economic Zone and integrating the model areas of Yangtze River Delta Region;
  • On 26 December 2019, the minister of Ministry of Transport, Mr, Li Xiaopeng, delivered his forward-looking speech in the business conference of national transport and its transportation in 2020 that RMB800.0 billion will be invested in developing a railway network in China. As disclosed in the chairman’s report of the business conference of China State Railway Group Co., Ltd. dated 2 January 2020, the central government had assigned a task to the company to build a railway spanning across over 4,000 kilometres in China including the 2,000-kilometre rails for high-speed trains;
  • In 2020, “new infrastructures” (which are principally involved in seven major sectors including 5G infrastructures, ultra-high voltage cables, intercity express railway and intercity rail transport, charging poles for new energy automobiles, big data centres, artificial intelligence as well as industrialised internet) will become the driving force of new momentum for the vitality of the economic growth. As at 1 March 2020, 13 provinces together with municipalities under central government direct administration (including Beijing, Hebei, Shanxi, Shanghai, Heilongjiang, Jiangsu, Fujian, Shandong, Henan, Yunnan, Sichuan, Chongqing and Ningxia) have published their lists of 2020 investment plans for key infrastructure items which cover a total of 10,326 items with over RMB33 trillion investment solely in new infrastructures; and
  • The “Key highlighted tasks of SGCC in 2020” published by SGCC in early March of 2020 in relation to the 10 major categories of projects including by Internet of Things for Electricity, comprehensive energy service, ultra-high voltage wires, the operation and distribution of power integration, electricity power market transactions and chips as well as details of 31 specific projects, of which the construction of 7 ultra-high voltage direct current projects will be approved this year. Besides, SGCC has been striking for the approval of two privately invested ultra-high voltage direct current projects. SGCC expects that the production of ultra-high voltage lines will generate investment of approximately RMB150.0 billion of investment for this year.

In view of the above, the Group is still confident about the prospects of the wires and cables industry in China in 2020 despite the unprecedented challenging economic environment.

Having said that, the Group still has many challenges and ongoing tasks in 2020. For example, improving the risk management of the Group, exploring the market share and strengthening the team management. The Group will focus on the following four areas in its business operations in 2020:

  • in response to the adverse conditions of market shrink across multiple industries, the Group will shift its business concept and philosophy by expansion of high-end markets and exploration of untapped markets while keeping its strength in the development of the existing established markets to ensure continuing stable business development;
  • the Group will strengthen its prevention and control in all aspects relating to trade receivables, process control, repayment of loans, appraisals and evaluations of contracts and intellectual properties to avoid any material business risk;
  • the Group will strengthen its reinforcement in the internal control, consolidate its management foundation, deepen the concept of its services, broaden its income sources and reduce its costs, save energy and reduce consumption, improve management efficiency and facilitate the high quality management development; and
  • the Group will put more effort on technology advancement and production capacity improvement in an attempt to unleash more development potential in order to further boost business driving momentum in 2020. Four high-speed production lines for medium-rated voltage cables were set up in 2019, two of them will commence production in May 2020 while the other two will commence operation in October 2020. Two mineral insulated cable (BTTZ) production lines will be added to the fire retardant cable workshop.