China Textile acquires Jiangxi huachunse textile technology to consolidate the position of leading yarn manufacturer in Jiangxi Province

China is a large textile country, with an annual textile garment trading volume accounting for one third of the world's total volume. In order to seize the opportunity of future development of the textile garment industry, China Textile Holding Co., Ltd. (03778), a leading textile enterprise in Jiangxi Province, is also actively seeking acquisition cooperation opportunities to expand production capacity. On September 30, China Textile announced to purchase Jiangxi huachunse Textile Technology Development Co., Ltd. at a price of 200 million yuan, so as to improve the group's production capacity output further consolidate its leading position as the three largest spinning stocks in Hong Kong. In addition, since the listing of China Textile in December 2011, the stock price has been stable at 0.7 of the offering price, every year, dividends are paid back to shareholders

Huachun's main business is to produce sell polyester yarn, hemp grey polyester yarn cotton yarn in Jiangxi Province. Its main assets are production facilities located in Fengxin Industrial Park, Jiangxi Province, with a total area of about 288 mu (about 192, 06 square meters), including six production workshops, the capacity of each workshop is 50000 spindles. Based on the production capacity of ingots, the total production capacity of Huachun is 300000 ingots about 54000 tons per year. The production capacity of Huachun polyester yarn, hemp grey polyester yarn cotton yarn is 150000, 100000 50%, 000 spindles respectively, while the production capacity is about 29000, 20000 5000 tons per year respectively. In terms of its capacity, Huachun's current market value is relatively low. Therefore, it is a wise decision for China textile to purchase at this time.

After the completion of the acquisition, it is expected to greatly increase the production capacity even output of China's fabrics. According to its 2013 annual report, China's textile production capacity was 360000 spindles at the end of 2013, the output was about 61849 tons. It is believed that through the synergy effect after the acquisition, the production capacity of China's fabrics will increase substantially to 100000 tons. At the same time, the increase of production will drive the growth of turnover. At the end of 2013, Huachun's revenue was 533 million yuan, while the turnover of China's textile industry in the same period was about 880 million yuan. If the company can maintain its existing advantages stable turnover in the future, it will surely result in the effect of strong cooperation, which is expected to bring more than 1 billion yuan of turnover to China's textile industry.

Zheng Hong, chairman of China textiles, said that the acquisition of Ma grey polyester yarn products, which can enable the group to increase its production capacity output in a cost-effective manner, diversify its product mix, will increase the group's bargaining power in terms of pricing. The group refers to the acquisition of raw materials through diversified large-scale procurement The bargaining power further strengthens the group's position as a leading yarn producer in Jiangxi Province.

Relevant costs will be paid by the group's internal resources other fund-raising activities. After the acquisition, Huachun will become a wholly-owned subsidiary of China textile, its financial statements will be recorded in the group's financial statements.