Global Demands Decrease, Income Falls Slightly
China’s major furniture product manufacturer Huisen Household International Group Ltd. (Huisen Household or the Group; HKG: 2127) announced unaudited interim results for the period ended 30 June 2022 (the Reporting Period) yesterday.
During the reporting period, the weak real estate market and the interest rate hike caused a contraction in the number of deals made. Inflation caused by the quantitative easing policy started to emerge in 2022, fuelling the uncertainties of the economy. Reduction in subsidy, the U.S. housing price remained at a high level, and the rise in interest rate have all contributed to the plunge in the number of property transactions, leading to relatively weak demand for furniture in the first half of 2022.
In the first half of 2022, The Group’s revenue was approximately RMB1.96 billion, representing a decrease of approximately 18.3% from approximately RMB2.40 billion compared to the same period of 2021. Profit was approximately RMB298.0 million, representing a decrease of approximately 29.2% from approximately RMB420.8 million compared to the same period of 2021.
Mr. Zengming, chairman and executive director, said: “The weakened real estate markets in Europe and U.S. and a relatively faint furniture market have led to the decrease in the number of orders from the major customers of the Group. Notwithstanding the drop in revenue during the reporting period, the Group has successfully expanded its business to certain small and medium size enterprises customers and products were sold to more different countries or regions gradually. During the reporting period, we have reached an agreement of cooperation with Home-depot, a well-known chain store of furniture in U.S., orders from Home-depot have been increased progressively.”
Panel-type Furniture
During the reporting period, the decrease in demand from the overseas market such as the U.S. led to a decrease in revenue of panel-type furniture from approximately RMB2.26 billion to approximately RMB1.85 billion for reporting Period, representing a decrease of 17.9%. The decrease in gross profit margin was mainly attributable to (i) the reduction in average selling price for some of the panel-type furniture as a result of the depreciation of RMB against U.S. dollar and (ii) the increase in the price of raw materials.
Upholstered Furniture
During the reporting period, the revenue from upholstered furniture recorded a decrease of approximately 28.1%. The decrease in revenue was mainly due to the decrease in demand for upholstered furniture as a result of the slowdown of the real estate market in Europe and U.S. During the Reporting Period, the average selling price for some of the upholstered furniture has been reduced as a result of the depreciation of RMB against U.S. dollar, leading to an overall decrease in the gross profit margin of the upholstered furniture.
Sport-type Furniture
During the reporting period, the revenue from sport-type furniture amounted to RMB53.9 million, representing a decrease of 22.8% from the corresponding period of 2021, mainly due to the decrease in order during the Reporting Period. The gross profit margin of sport-type furniture decreased from 30.1% in the corresponding period of 2021 to 26.6% in the Reporting Period, mainly due to the reduction in the selling price of some of the products. Looking to the second half of 2021,
During the reporting period, the Group continued to strengthen its original design capability and launch more original design manufacturing (“ODM”) products. Revenue of ODM furniture accounted for more 81.1% of the Group’s total sales for the Reporting Period, and the proportion was maintained at above 80%. Original Equipment Manufacturing (“OEM”) Furniture accounted for 18.9%.
On 6 January 2022, the Group entered into an agreement with the local government authority to obtain the right to use two parcels of land with a total area of 33,539.30 sq.m. and on 24th August 2022 obtain the right to use another two parcels of land with 65,556.80 sq.m. in Nankang District, Ganzhou. Those four lands are nearby with a total area 99,096.10 sq.m. are mainly for the construction of a new plant which will specialise in the manufacturing of particleboard, a major material used in the production of furniture products. The new plant is close to the factory operated by Ganzhou Aigesen Wood Panel Co., Ltd*.
For improving and optimizing the marketing and advertising campaign of the Group and to better promote the smart furniture products of the Group, the Group has entered into a strategic cooperation agreement with Netjoy Holdings Limited (HKG: 2131) (Netjoy), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 24th January 2022. The Group and Netjoy shall jointly cooperate for the development of a cloud-based virtual reality smart home project based on Metaverse, including but not limited to developing a virtual reality exhibition hall for consumers’ interactive experience, live broadcast sales by artificial intelligence (“AI”) sales anchor and promotion and sales of the smart home products of the Group through the application of AI technologies.
Looking ahead to the second half of 2022, though various countries have already relaxed the social distancing measures and travel restrictions, with the energy crisis in Europe and the pressure of high inflation in the U.S., the market sentiment in the private housing market in Europe and U.S. is difficult to rebound swiftly, it is expected that the export of furniture made in China would still experience a period of depression. The “World Furniture Outlook 2022” issued by Centre for Industrial Studies (CSIL) of Italy predicts that the growth in global furniture consumption could be around 4% in 2022, and the market performance for European and Asian countries are better than that compared to other countries. While the growth is relatively minimal, the group will continue to uphold its business strategy to continuously explore markets outside U.S., establish strong relationship with new customers, and continually strengthens the ODM capabilities, making the advancement of invested projects with the raised funds in a down-to-earth manner. We will also solidify our core competitiveness, and continuously increasing our market share, thus to keep on to be the leading force while being the leader of the panel type furniture industry.
About Huisen Household International Group Limited
We are a manufacturer of furniture products in the PRC with a primary focus on the manufacture and sales of panel furniture by way of ODM. Over 80 % of our revenue from our furniture products was generated from our ODM business and the remaining was generated from our OEM business. All of the products we produced for sales were not under our own brands. Our vertically integrated business model allows us to combine our in-house product design and development expertise with our integrated manufacturing platform, providing full range services covering product design and development, manufacture and sales of panel furniture, and securing a stable supply of our principal production materials, i.e., particleboards and steel tubes by manufacturing them on our own.