On March 14, 2022, Oriental Yuhong, known as the “waterproof grass”, issued an announcement and officially announced a price increase.
As the prices of main raw materials continue to rise and product costs continue to increase, the company has decided after research that starting from March 16, the prices of some of the company’s main products will be increased.
Wang Jianguo, the general sponsor of the China Design Dean Base, said: “In the current severe market environment, it is difficult to increase product prices and labor costs are rising irreversibly. This is combined with the increase in raw material prices, making companies feel more like ‘Alexander’.”
The price increase of Oriental Yuhong covers a wide range of main products, among which asphalt membranes are increased by 15% –
20%; polymer coiled materials will be raised by about 10%; polyurethane coatings will be raised by about 20%; water-based coatings will be raised by about 20%; asphalt coatings will be raised by about 20%.
Oriental Yuhong said that this product price adjustment will help further enhance the company’s sustainable profitability and is expected to have a certain positive impact on the company’s operating performance.
Oriental Yuhong belongs to the waterproof building materials industry, a subdivision of the building materials industry. Its main products include building waterproof materials, building decorative coatings, special mortars and building energy-saving materials.
In fact, Oriental Yuhong is not the first company to announce price increases this year. Listed companies have already announced price increases of varying degrees at the end of February, and rising raw material prices are the main reason why industry companies have announced price increases.
Hu Zhongxin, secretary-general of the China Furniture, Building Materials and Decoration Association, believes that waterproof building materials are “necessities” in the construction and building materials industry, and price increases will have little impact on product sales.
Many securities firms are also optimistic about the development of the waterproof building materials industry. Guohai Securities issued a research report saying that the waterproof industry has broad development prospects, the market stock continues to increase, and the market is expected to undergo structural adjustments and further increase concentration after the introduction of new industry standards.
In the context of carbon neutrality, photovoltaic roofing is gradually emerging, and the age requirements of the waterproof layer of photovoltaic roofing have become a new growth point in the waterproofing industry.
Wang Jianguo pointed out, “The response of waterproof building materials companies must still return to ‘cost reduction and efficiency increase’ and ‘increase revenue and expenditure reduction’, and they must deeply integrate with the upstream and downstream industries to ‘hold together for warmth’, and conduct in-depth research and meet the new needs of customers in the new era.”
It is worth noting that the rise in upstream prices is not something that only occurred this year. In 2021, the price of raw materials in the waterproof building materials industry will show a sharp increase trend.
Hu Zhongxin said, “The price increase of raw materials will have a greater impact on small and medium-sized enterprises, which may cause these enterprises to be unable to support or have quality problems. However, for first-tier brands, it will not have a big impact. On the one hand, the bargaining power of first-tier brands is strong; on the other hand, due to branding, consumers’ brand awareness continues to increase, and it can be seen that the current second- and third-tier brands have sharply declined.”
Faced with the pressure of price increases, Oriental Yuhong’s performance has still achieved growth against the trend.
The 2021 performance report released by the company shows that during the reporting period, the company’s revenue achieved 31.892 billion yuan, a year-on-year increase of 46.76%; the net profit attributable to shareholders of listed companies achieved 4.185 billion yuan, a year-on-year increase of 23.50%.
Dongfang Yuhong said that the company’s product sales have achieved rapid growth compared with the same period last year, and the scale of its material sales business and construction service business have increased.
Although the price of raw materials increased significantly during the reporting period, the company alleviated certain pressure on rising costs by strengthening the procurement of raw materials, cost and expense control, and continuing to exert economies of scale.
In early November 2021, Oriental Yuhong also released a share repurchase plan for the later implementation of employee stock ownership plans or equity incentives.
The total amount of funds used for the repurchase shall not be less than 1 billion yuan and shall not exceed 2 billion yuan, and the repurchase price shall not exceed RMB 55.79 per share.
According to the company’s latest repurchase progress announcement, as of February 28, Oriental Yuhong has repurchased a total of 4.8878 million shares, with a total transaction amount of 212 million yuan.
