Industry News
The Breakout of Rubber Machinery Companies

Following the gushing development in 2013 and the decline in the second half of 2014, the rubber machinery industry has entered recession since 2015, with both the business revenue and profits falling to a varying extent. Then what should rubber machinery enterprises do to maintain normal production and operation despite the dim prospects of the tire industry? Business insiders believe that the only way out is to seize opportunities presented by Industry 4.0 and Made in China 2025 initiatives, make innovations and transform their business model.

The sluggish rubber machinery market

Thanks to the development of the auto industry, Chinese tire industry has benefited from investment booms and rapid growth of production capacity. But in recent years, under the shadow of domestic and overseas markets and international trade frictions, its structural overcapacity has become prominent, its yield growth has slowed down and the number of new projects has shrunk significantly. The Chinese tire industry has entered the new normal since 2015, with many tire companies closed down.

The performance of the rubber machinery industry is strongly associated with the overall operation of the rubber industry. Thanks to the rapid expansion of the tire industry in recent years, the production capacity of the rubber machinery industry has also increased remarkably. But as the investment in the tire industry plunges, the rubber machinery market has entered a winter, struggling with production overcapacity and order collapse. Rubber machinery companies have seen their business revenue and gross profit margin falling and since the second half of 2014, their business performance has been damaged to a varying degree.

According to the business performance report for the first half of the year issued by MESNAC on August 19, the company's business revenue fell by 35.57% from the same period of the previous year, total profits down by 98.16% and the net income attributable to shareholders down by 84.95%. Other rubber equipment companies are not spared either by the gloomy market prospects. For example, Tianjin Saixiang Technology Co., Ltd, Greatoo Intelligent Equipment Inc., Shenyang Blue Silver Industry Automation Equipment Co., Ltd., and Beijing New Universal Science and Technology Co., Ltd. have all announced significant decrease in their business revenue, business profits, and net income attributable to shareholders in their business performance report for the first half year.

Fortunately MESNAC has actively taken measures to respond to the situation despite all the negative influence, and has been sustaining normal operation.

But the poor business performance has cost Dalian Rubber & Plastics Machinery Co., Ltd. and Guangzhou SCUT Bestry Technology Co., Ltd. the status of listed company and the chance to becoming one, respectively.

Dalian Rubber & Plastics Machinery produces mainly rubber and plastic machinery. Because of the sluggish tire market and intense competition from Japanese and Italian rivals, it slid into losses in 2014 and generated negative net profits in 2015. To avoid the fate of "ST", on November 5 last year, it released a restructuring plan and on June 7 this year, it helped Hengli Chemical Fiber go public through backdoor listing. By then Dalian Rubber & Plastics Machinery, which launched IPO in August 2001, had no choice but to bend to the fate of delisting.

The rubber equipment industry is a capital intensive one and requires a lot of money for operation. On July 1, 2014, SCUT Bestry's IPO application was declined. Then FSPG Hi-Tech Co., Ltd. offered to buy it on condition that it could accelerate stock sales, collect more receivables and reduce the operational fund by RMB 285.4121 million between July and December 2014. But the SCUT Bestry's funding gap continued to widen, failing to hit the estimated number provided by the assessment agency, amounting to RMB 255 million in 2014 and RMB 503 million by November 30, 2015. Since SCUT Bestry failed to meet the condition for acquisition, FSPG Hi-Tech decided to terminate the deal, ending the former's hope of listing.

Seek a way out

The rubber equipment industry has actively sought ways to deal with the adverse conditions faced by the tire industry in the upstream of the industrial chain. More and more rubber equipment companies continue to consolidate their principal business and upgrade products by capitalizing on opportunities presented by the Industry 4.0 initiative and providing solutions for green, intelligent tire manufacturing. Some of them have even extended their business to other sectors, or to both upstream and downstream of the industrial chain, and some have fostered new growth points.

Robots and intelligent manufacturing: two priority directions for business restructuring  

MESNAC has continued to input in automated logistics and robots and vigorously developed robotics for logistics. Recently it has raised about RMB 1.26 billion through private equity placement for four projects: "Intelligent Manufacturing Base for Tire Equipment", "Phase II of the Commercialization Base for Industrial and Service Robots and Intelligent Logistics System", "Research Center for Intelligent Tire Plants", and "Intelligent Tire Application Technology Center". These projects, after put into operation, are expected to sharpen the company's competitive edge, increase its business revenue and net profits and improve its overall profitability.

While centering on the making of tire molds and hydraulic curing press, Greatoo Intelligent Equipment is sparing no efforts in developing high-end intelligent complete equipment such as industrial robots and has extended its business to auto parts from tires and 3C (computers, mobile phones and consumer electronic goods) markets. It spends RMB 80 million on one project alone with the annual capacity of making 500 sets of industrial robotic equipment of six-degree freedom.

Tianjin Saixiang Technology controlled Guangzhou Jingyuan Mechano-Electric Equipment Co., Ltd. in 2014 and teamed up with the latter in automation and robotics, opening up vast development space. Jingyuan Mechano-Electric Equipment has years of experience in AGV intelligent logistics and can help Saixiang provide solutions integrating "complete equipment for tire production and intelligent logistics" for tire companies.

At the end of last year, Shenyang Blue Silver Industry Automation Equipment had its "SBS-DFTL Automatic Logistics System for Digital Tire Manufacturing Plants" certified as a ministerial-level scientific & technological achievement. On March 17, it entered into a RMB 107.5 million purchase contract for its automatic logistics system with Hefei Wanli Tire; on August 3, it signed a RMB 100 million contract with Anhui Giti Radial Tire for Passenger Cars for the transport of green tire depots, speed chains and truss manipulators, the automatic sorting of semi-steel tires and automatic shelving and packaging.

Consolidate principal business, seek product innovations and upgrade products

Qingdao Doublestar Rubber & Plastic Machinery Co., Ltd., after moving to a new site, has invested about RMB 490 million in an automatic equipment manufacturing project with the annual capacity of 400 tire curing presses, 100 building machines and 20 conveyor belt flat-panel curing presses.

At the recently-held inauguration ceremony for a green, intelligent, modern plant, the Safe-Run Group launched the HPC100 one-stage building machine for semi-steel radial tires, more automatic and intelligent than previous products. It plans to invest RMB 660 million to produce 150 building machines for semi-steel and all-steel tires and 500 hydraulic curing presses for tires per year.

Expand into new areas of the industrial chain
Since 2007 when it became the first Chinese gif & fixture EPC contractor of Air Bus, Saixiang has accumulated rich experience and technologies for aviation equipment manufacturing, formed core competency and established close partnerships with Air Bus and other prestigious aviation manufacturing companies at home and abroad. On April 25, it won a 10-year contract worth RMB 594 million for the supply of jig & fixture to fix, support and protect assembly parts during the transport of large parts of Air Bus' A320 airplanes.

On top of the phase I project of the Binhai plant with the annual capacity of 450 curing presses, SINOARP will raise money for the phase II project to produce 220 tire curing presses (including 20 giant-tire curing presses) per year as well as supportive machining parts. By trying to make some machining parts on its own, it aims to move up along the industrial chain of tire curing press.

Qingdao Beihai Mechanical Equipment Co., Ltd. (BME) has built production facilities for rail transport equipment and rubber machinery plants to meet the needs of subway tunneling machines and conveyor belt curing press production line.
Beijing New Universal Science and Technology suspended share trading on March 24 to plan for asset restructuring and actively explore other sectors and markets in order to reduce dependence on the tire industry.

Tianjin Jiurong Industrial Technology has invested RMB 120 million to increase the production capacity of tire testing equipment to meet the growing demand for tire and wheel testing equipment.

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