Semi truck leader CIMC posted its lowest net profit in nearly five years in 2021 due to rising raw material costs

The world's leading semi-trailer company saw profit growth in 2021, thanks to rising raw material prices, overbuying and rising ocean freight rates.

According to the 2021 annual report issued by CIMC (301039.SZ) on March 25, in 2021, the company achieved revenue of 27.648 billion yuan, a year-on-year growth of 4.34%; ​net profit was 901 million yuan, down 20.4 percent year-on-year. Net profit was the lowest in almost five years.

At the same time, CIMC Semi Trailer Manufacturers also disclosed the 2021 annual profit distribution plan. The company intends to pay a cash dividend of 2 yuan (tax included) for every 10 shares to all shareholders.

Public information shows that CIMC is the global leader in semi-trailer and special vehicle manufacturing. According to the ranking data of global semi-trailer manufacturers in 2021 by output released by Global Trailer in 2021, CIMC has been ranked first in the world for 9 consecutive years. Cimc's controlling shareholder is CIMC, which was also spun off from the latter's vehicle business. On July 8, 2021, CIMC landed on the GEM, achieving A+ H dual listing.

Cimc mainly adopts the business model of "overseas operation, local manufacturing". As of the end of 2021, the company has 23 production plants and 10 assembly plants worldwide.

9aa511a724d45c645f2dcd39a85d6aa2In terms of products, in 2021, the company's main business, vehicle sales revenue of 24.825 billion yuan, accounting for 89.79% of the operating revenue, a year-on-year increase of 2.51%; ​the revenue of semi-trailer and special vehicle parts was 2 billion yuan, accounting for 7.23% of the revenue, with a year-on-year growth of 20.88%; ​other income was 823 million yuan, accounting for 2.97 percent of operating revenue, up 31.31 percent year-on-year. In 2021, the company sold 200069 vehicles of all types globally, up 3% year on year, and the company's comprehensive gross margin further declined to 11.02%.

As global inflation continues to rise, commodity prices and transportation costs rise, the release of consumer demand has put great pressure on the global supply chain, causing congestion in numerous ports around the world and increasing shipping costs. During the reporting period, CIMC's global semi-trailer business gross margin declined by 2.4 percentage points year-on-year due to the impact of rising costs.

On July 1, 2021, the implementation of "Heavy Diesel Vehicle Pollutant Emission Limits and Measurement Methods (China's Sixth Stage)" caused the phenomenon of advance purchase in the market. In the first half of 2021, industry homogenization competition intensified, and the market demand was overdrawn in the second half of the year. Therefore, the sales volume of concrete mixers in the domestic market was affected.

Cimc claimed that under the repeated epidemic, global inflation continues, supply chain shortage, bulk commodities into the stage of "supply and demand gap narrowed, the fundamental rebalancing", raw material prices will continue to affect the semi-trailer industry.

The cost of raw materials accounts for the vast majority of a company's operating costs. The report showed that the company's raw material cost in 2021 increased by 7.42% year-on-year to 21.26 billion yuan, accounting for 86.43% of the operating cost.

In terms of share price performance, CIMC (301039.SZ) has been on a downward trend since the end of last year, with a decline of 40%. As of the morning of March 25, it closed at 9.84 yuan per share, with a market value of 19.9 billion yuan.

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