It is learned that the union dock workers at the U.S. West Coast shipping ports have failed to reach a labor agreement with freight companies and terminal operators. Although both sides have promised that the ports will continue to operate normally, concerns about freight delays continue as the traditional peak season for foreign trade approaches.
Many shippers have rerouted cargo to ports on the East Coast and Gulf Coast to offset delays on the West Coast caused by failed labor negotiations, some of which are now experiencing more severe congestion and vessel backlogs. Logistics issues have always been a major pain point for cross-border people. Delivery delays caused by strikes and port congestion can easily affect the pace of stocking during the peak season, and high freight costs continue to erode sellers' profits. Not only small and medium-sized sellers, but also the performance of top sellers is also affected by logistics issues. The road to a big-selling listing is long and arduous, and high shipping costs are impacting performance! Zhiou Home Furnishing, a home furnishing giant that has completed five rounds of financing in three years, has had many twists and turns on its road to IPO, and has been forced to suspend its review due to financial problems. Recently, Zhiou disclosed its response to the Shenzhen Stock Exchange's third round of review inquiry letter.
Cross-border navigation , like 8 ▲ Video account focuses on cross-border navigation 1. Revenue has been rising steadily, but gross profit margin has been declining year by year The announcement showed that Zhiou's revenue in 2019~2021 was 2.326 billion, 3.971 billion, and 5.967 billion, respectively, with an annual compound growth rate of 60.19%, showing a stable growth trend. ▲ The picture comes from Zhiou Home Furnishing Announcement However, in terms of net profit, in 2020, benefiting from the rapid growth of revenue and better control of period expenses, the net profit for the current period increased significantly year-on-year, reaching 380 million. However, in 2021, due to the sharp increase in shipping costs, exchange rate fluctuations and increased related expenses, the net profit fell significantly year-on-year. Looking at Zhiou's gross profit margin over the past three years, there has been a trend of a gradual and slight decline. In 2020, due to the increase in the proportion of B2B channel revenue, the gross profit margin of this sales model was relatively low, and affected by the slight increase in shipping costs in the third and fourth quarters, the current gross profit margin decreased. In 2021, due to the sharp increase in shipping costs, the gross profit margin fell significantly compared with the previous year. (II) The surge in the proportion of shipping costs may become a key factor in the decline in performance Judging from the performance changes of Zhiou in recent years, freight costs are undoubtedly a crucial influencing factor. In 2020, shipping costs to Europe accounted for 6.83% of the main business costs, which rose to 15.59% in 2021, reaching 468 million yuan. Since 2021, affected by the global epidemic, the supply and demand in the shipping market has been unbalanced, causing shipping prices to continue to soar, resulting in European shipping costs increasing by 281.83% compared to 2020, and the company's main business gross profit margin decreased by about 5 percentage points year-on-year. ▲ The picture comes from Zhiou Home Furnishing Announcement According to Zhiou's estimates, the increase in shipping costs caused the company's gross profit in 2021 to drop by 282 million yuan year-on-year, which means that the increase in shipping costs may be the main reason for the decline in its gross profit margin and operating performance. (III) Freight rates are expected to fall, leading to a narrowing of the decline in European net profit From January to March 2022, Zhiou's revenue decreased by 4.07% year-on-year, but its operating costs increased by 6.79% year-on-year, mainly due to the continued increase in shipping prices since 2021. ▲ The picture comes from Zhiou Home Furnishing Announcement However, as relevant domestic and foreign departments have taken relevant regulatory measures in response to the abnormally high shipping prices, and a large number of container companies have begun to expand production, the tight supply of shipping capacity is expected to be alleviated. Zhiou said that shipping prices have gradually stabilized since the fourth quarter of 2021, and by the first quarter of 2022, there were signs that the upward trend had reversed. ▲ The picture comes from Zhiou Home Furnishing Announcement According to the month-on-month changes in the average index of the China Export Containerized Freight Index (CCFI) from the second half of 2020 to the present, it can be seen that since the first quarter of 2022, the growth rate of the freight index has gradually slowed down or fallen, and it began to decline month-on-month in March. ▲ The picture comes from Zhiou Home Furnishing Announcement For this reason, Zhiou believes that the company's profitability will be greatly restored. At present, the decline in its net profit in the first quarter of 2022 has been significantly narrowed compared with the 54.77% year-on-year decline in net profit after deducting non-operating items in 2021. The rising shipping costs in recent years have posed severe challenges to many cross-border companies. Not only Zhiou, but also major retailers such as Anker Innovations and Huabao New Energy have disclosed in their financial reports the negative impact of rising logistics costs on their profit levels. However, Maersk expects that shipping prices will fall back to normal levels in the second half of the year. As it turns out, a cooling trend has already begun. Sky-high freight rates plummet, 70% of customers want to cancel the contract! It is learned that looking at the current shipping index of major routes, due to the reduction in transportation demand, the freight rates of the eight major routes to and from the United States, Europe and Asia have continued to decline by 1% since the beginning of June to US$7,502.43/40ft. It is reported that the current freight rates for some containers on the US West Coast route are less than US$7,000/FEU, and freight rates on the European route are also showing a trend of falling below US$10,000. According to Xeneta's survey, as freight rates continue to fall, nearly 70% of shippers intend to renegotiate their contracts or even breach them. At present, due to the decline in freight demand, some shipping companies have taken the initiative to reduce freight rates to increase cargo. Among them, CMA CGM announced the freezing of spot container freight rates in September last year. Recently, under pressure from the government, it is preparing to provide its distributor customers with a discount of 500 euros per 40-foot container for consumer goods imported through French ports, which means that the freight rate will be reduced by nearly 10%. In addition to the price cuts for the domestic import market, the line also offers reduced prices for French overseas territories. For these markets, CMA CGM has decided to apply a discount of up to €500 (US$520) for a 40-foot container carrying imports. This is equivalent to a discount of 10% to 20%. It is learned that the recent Meisen quotation of a Shenzhen freight forwarding company is as follows: - Meisen limited time as low as 16/KG
- Meisen scheduled ship as low as 15/KG
- Meisen overtime ship as low as 12/KG
▲ The picture comes from the seller communication group It can be seen that compared with the high freight rates of more than 30 yuan/KG last year, the first-leg logistics fee quotations of major logistics companies now show obvious signs of decline. The current container shipping market is showing a cooling trend, which is mainly due to the impact on the demand side. Nowadays, the inflation level in Europe and the United States continues to rise, which has greatly suppressed consumption, leading to a sharp decrease in foreign trade orders. Although the traditional peak season in the second half of the year is approaching, industry insiders predict that peak season freight rates will hardly replicate the surge of the same period last year. This is undoubtedly good news for sellers, as their profits may rebound as cost pressure eases. Do you think logistics will be a major challenge during the peak season? Feel free to leave a comment in the comments section~
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