① Jiyou Co., Ltd. announced that it plans to terminate the construction project to build a new production line with an annual output of 500,000 large boxes of tobacco labels. The reason is that the development of the cigarette label business has not reached the target of the original plan in the past two years, and the cigarette packaging and printing business will face a sharp decline in the future. ② Regarding the remaining use of capital raised, the company said it will actively plan new fund-raising investment projects. In addition, the company plans to use surplus production capacity from the original cigarette label printing business to develop the social packaging printing business.
Finance Association, April 17 (Reporter Wu Chao) The Jiyou Co., Ltd. (603429.SH) cigarette label production line construction project came to an end after nearly four years of operation. This evening, the company announced that it plans to end the Taihu Lake production base upgrade and construction project to build a new production line with an annual output of 500,000 large boxes of tobacco labels. Regarding the remaining use of funds raised after the termination of the project, the company said it will also actively plan new fund-raising investment projects.
A market analyst told the Financial Federation reporter that Jiyou Co., Ltd. chose to terminate the cigarette label production line project at this time. The judgment on the market prospects was probably too pessimistic, and the company's development in the tobacco label business did not meet expectations. This may be related to the company's shortcomings in product research and development, market expansion, and cost control. Although this strategic adjustment can ease the company's financial pressure in the short term, in the long run, it may have a negative impact on the company's market competitiveness and brand image.
Since its establishment in 1998, Jiyou Co., Ltd. has been focusing on the development and production of cigarette splicing paper, and is one of the earliest professional suppliers of cigarette splicing paper in China. In 2018, Jiyou Co., Ltd. decided to raise no more than 980 million yuan to invest in a tobacco label production line construction project with an annual output of 1 million boxes, aiming to achieve the company's development strategy of “becoming a first-class domestic professional packaging and printing enterprise with tobacco packaging materials as the main products”.
At the time, the company believed that the upgrading of national consumption would also increase demand for cigarette products, especially high-end cigarettes. The steady growth of the downstream tobacco industry will drive the development of the cigarette packaging materials industry, and Jiyou Co., Ltd. already has the basic conditions to further expand its tobacco labeling business.
However, this ambitious plan had many misfortunes. The company actually raised only about 401 million yuan in capital. As actual capital raised was reduced compared to the original plan, the “Tobacco Label Production Line Construction Project with an annual output of 1 million large boxes” was reduced from 360 million yuan to 140 million yuan, and the “R&D Creative Center and Industrialization Base Construction Project” was reduced from 411 million yuan to 255 million yuan. Since then, in 2021, the company adjusted the original plan to invest in the “R&D Creative Center and Industrialization Base Construction Project” to invest in the company's “Taihu Lake Production Base Upgrading and Construction Project to Build a New Tobacco Label Production Line with an Annual Output of 500,000 Large Cans”.
With changes in the market environment and consideration of the company's actual situation, Jiyou Co., Ltd. has now decided to adjust the plan once again. According to the announcement, the company stated that due to factors such as macroeconomics and the development of the downstream tobacco industry, the company's tobacco label business development in the past two years has not reached the target of the original plan. In addition, the company won fewer bids during the 2023 bidding process for cigarette packaging materials. According to the current situation, the company is expected to face a sharp decline in cigarette packaging and printing business in the future.
As of April 16, 2024, the project has invested 187.995 million yuan, and the remaining capital raised is 238 million yuan. Regarding the remaining use of funds raised after the termination of the project, the company stated that it will continue to store the funds raised in the original special account, and will actively plan new fund-raising investment projects to meet the needs of the company's business development and improve the efficiency of the use of the raised funds.
While terminating the cigarette label production line project, Jiyou Co., Ltd. also revealed new trends in its future development. Jiyou Co., Ltd. said that in order to achieve the steady development of the company's packaging and printing business, the company will rely on its advantages in printing and packaging experience, management, equipment, technology, and talent reserves to accelerate the development of social packaging and printing business. The company plans to use surplus production capacity from the original cigarette label printing business for the social packaging and printing business. The company's current printing production capacity can still meet the needs of business development.
As for Jiyou Co., Ltd. to shift resources to the social packaging and printing business, the people mentioned above believe that this is an attempt at diversified development, but the field of social packaging and printing is also fierce. Jiyou Co., Ltd. needs to face competitive pressure from many mature enterprises in the industry, and at the same time cope with changing consumer needs and market trends. The prospects are still full of uncertainty.