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Furniture Market – China November 2014
Executive Summary Market
Drivers & Challenges
Trends Government
Global furniture market is growing at a CAGR of ‘r1’% and is expected to reach USD ‘m1’ bn by 2018 Chinese furniture market is the largest in the world, growing at a CAGR of ‘r2’% China is also the largest exporter of furniture in the world, commanding a share of ‘r3’% in the global furniture market ‘n1’ furniture dominates the market, followed by furniture made from ‘n2’ and ‘n3’ Drivers Healthy Economy and Rising Income Real Estate Boom Accelerating Urbanization and Changing Lifestyle Furniture Expositions Strong Distribution Network Strong Demographics
Challenges Huge Importer of Raw Materials Risk of a Housing Bubble Intense Competition and Rising Operating Costs Credibility Crisis
Shift in Raw Material Sourcing Increased Localization of Business Model Innovation in Product Designs National Standards for Furniture Market New-for-Old Furniture Subsidy Program 2013 Major Players
Competitive Landscape
Company 1
Company 2
Company 3
Company 4
Company 5
Company 6
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•Macro-Economic Indicators •Introduction •Market Overview Global China
•EXIM Data •Drivers & Challenges •Government Initiatives •Trends •Competitive Landscape •Mergers and Acquisitions •Strategic Recommendations •Appendix FURNITURE MARKET IN CHINA 2014.PPT
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Economic Indicators (1/3) Current Account Balance USD bn u
y5 y4
p
y3
q
r
2011
2012
t
s
y2 y1 2010
2013e
2014e
2015e
Exchange Rate: Half Yearly USD/CNY
Period Average
Period High
c4
y6
c3
y5
a4
y4 y3 y2 y1
Period Low
b3
c2 c1 b1 a1
1/1/14
c5 b4
b2
b5 a5
a3
a2
2/1/14
3/1/14
FURNITURE MARKET IN CHINA 2014.PPT
4/1/14
5/1/14
4
Furniture products are used for various purposes and have become an integral part of life Introduction
• Furniture refers to movable objects which support activities such as sitting (such as chairs and sofas), sleeping (such as beds), keeping objects at convenient heights (such as desks and tables) and storing objects (such as closets and shelves) • The most used material for creating furniture is wood, followed by metal and plastic
Characteristics of Furniture Industry
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Global furniture industry derives strength and business opportunities from growing furniture sector in ‘c1’ Global Furniture – Market Size and Growth
Global Furniture Market – Overview • The furniture market has exhibited steady improvement over the years owing to the rising living standards, increasing disposable incomes, economic growth and urbanization
y4
• Globally, ‘c1’, ‘c2’ and ‘c3’ are the top manufacturers and exporters of furniture
y2
• ‘n1’ is the largest furniture company in the world, commanding a market share of about ‘r6’% of the entire furniture market
USD bn
r1% p
q
r
2013
2014e
2015e
t
u
2016e
2017e
2018e
y3
y1
Global Furniture – Market Share (2013)
• While furniture from ‘c1’ is known to be more affordable, ‘c3’ is traditionally regarded as the source of furniture made from high quality wood and having greater aesthetic appeal • Of late, furniture industries of emerging countries such as ‘c4’ and ‘c5’ have been growing rapidly, chiefly due to lower cost of production, weaker currency and expansion of their respective manufacturing activities
s
Country 1 r2%
Country 2
r5%
FURNITURE MARKET IN CHINA 2014.PPT
Country 3 Others r3%
r4%
6
China is the world’s largest furniture market, exhibiting strong growth potential through 2018 Domestic Furniture – Market Size and Growth
Domestic Furniture Market – Overview • China is the world's largest furniture manufacturing base, representing about ‘r5’% of the global furniture volume • In ‘y1’, China had surpassed ‘c1’ to become the world’s largest furniture exporter • The advancement of the furniture market of China is closely monitored and assisted by ‘n1’ It is a trade association run by volunteers from institutions, enterprises, social organizations and individuals from furniture market background
USD bn y5
r1%
y4 y3
p
q
2013
2014e
r
s
t
u
y2 y1 2015e
2016e
2017e
2018e
Domestic Furniture – Market Structure (2013)
It safeguards the interests of furniture companies and promotes standards that regulate the furniture market It updates furniture companies about the benchmark practices in the manufacturing, marketing and management of high quality furniture products
Segment 1
r4%
Segment 2 Others
r3%
FURNITURE MARKET IN CHINA 2014.PPT
r2%
7
East-coast provinces are the top furniture producing bases in China Furniture Production Bases in China • Furniture productions bases are primarily located along the East-coastal region in China • In 2013, the top five furniture producing provinces were ‘a1’, ‘a2’, ‘a3’, ‘a4’, ‘a5’ and ‘a6’ provinces • ‘a1’ is the largest furniture manufacturing province in China
Total Furniture Output in China USD bn r1%
y5 y4
p
q
r
s
a1
a2
y3
a3
a4
y2
a5
a6
y1 2010
2011
2012
2013 FURNITURE MARKET IN CHINA 2014.PPT
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Rise in furniture production in China… Exports
Total Exports (Value)
• China has witnessed a compound annual growth rate of ‘r1’% in exports in the last ‘n1’ years, owing to a large manufacturing base of furniture, skilled labor and price competitiveness • Primary export destinations include ‘c1’, ‘c2’, ‘c3’, ‘c4’ and ‘c5’ • The most exported products are ‘p1’
USD bn y5 y4 y3
r
s
2012
2013
q
p
y2 y1 2010
2011
Note: Figures are for the respective calendar years
Exports – Country-Wise Segmentation (2012-13)
Exports – Country-Wise Segmentation (2011-12)
Country 1 r2%
Country 1
Country 2
r8%
Country 3
Country 3
Country 4
r7%
Country 4
r13%
Country 5 r3% r5% r4% r6%
Country 2
Country 5 r11% r9% r10% r12%
Others
Others
Note: Total Exports includes exports to Hong Kong SAR and Macau SAR FURNITURE MARKET IN CHINA 2014.PPT
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…has resulted in eventual rise in exports HS Codes for Furniture Products
HS code
Product Segmentation 2012-13 HS 9401
r4%
Particulars
HS 9402 r1%
HS 9403 HS 9404
r3%
r2%
Product Segmentation 2011-12
HS 9401
r4%
HS 9402 r1%
HS 9403 HS 9404
r3%
FURNITURE MARKET IN CHINA 2014.PPT
r2%
10
Drivers & Challenges – Summary
Drivers
Challenges
Healthy Economy and Rising Income
Huge Importer of Raw Materials
Real Estate Boom
Risk of a Housing Bubble
Furniture Expositions
Intense Competition and Rising Operating Costs
Accelerating Urbanization and Changing Lifestyle
Credibility Crisis
Strong Distribution Network Strong Demographics
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All domestic and international players are subject to a host of national standards in the Chinese furniture industry • Government has adopted various standards, specifying product classification, technical requirement, test methods, inspection rules and marking issues, among others • All local and imported furniture products must be in compliance with the national standards Standard No.
Standard Name
Note: The list is not exhaustive FURNITURE MARKET IN CHINA 2014.PPT
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Trends – Summary
Shift in Raw Material Sourcing
Key Trends Innovation in Product Designs
Increased Localization of Business Model
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Porter’s Five Forces Analysis Threat of New Entrants •x
Impact i1
Impact i4 Bargaining Power of Suppliers •x
Competitive Rivalry
Impact i5
•x
Threat of Substitutes •x
FURNITURE MARKET IN CHINA 2014.PPT
Impact i2 Bargaining Power of Buyers •x
Impact i3
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Competitive Benchmarking (1/5) Public Trading Comparable (FY 2013)
Company 1
Company 2
Company 3
Company 4
Company 5
Market Capitalization (USD mn)
Share Price (USD)
EV/EBITDA (x)
EV/Revenue (x)
PE Ratio
Note: Top 5 Public companies based on the Market Capitalization; Market Capitalization, Share Price and PE ratio is as of 29/09/2014 FURNITURE MARKET IN CHINA 2014.PPT
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Competitive Benchmarking (2/5) Key Ratios of Top 3 Companies – Operational Basis (FY 2013) (1/3) Gross Margin
%
y3
Net Margin
a2
y5 y4
Operating Margin
a1 b1
a3
c1
b2
c2
y2
b3
c3
y1 Company 1
Company 2
Company 3
• Company 2 recorded gross margin of ‘a2’%, higher than both Company 1 and Company 3 which recorded gross margin of ‘a1’% and ‘a3’% respectively • Company 1 recorded operating margin of ‘b1’%, higher than both Company 2 and Company 3 which recorded operating margin of ‘b2’% and ‘b3’% respectively
• Company 2 recorded net margin of ‘c2’%, higher than that of Company 3 which recorded net margin of ‘c3’% but lower than that of Company 1 which recorded net margin of ‘c1’%
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Public: Company 1 (1/4) Company Information
Locations – China
Corporate Address Tel No. Fax No.
Website Year of Incorporation Ticker Symbol Stock Exchange
Products and Services Category
Headquarters Products/Services
H1
Key People Name
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Designation
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Public: Company 1 (2/4) Financial Snapshot
Key Ratios
Total Income USD mn
Profit / Loss
y3 y2 y1
Profit USD mn
Total Income
b
c
p
q
r
2010
2011
a
d
y6 y5
s
y4 2012
2013
Financial Summary
• The company reported total income of USD ‘s’ mn in FY 2013, registering an increase of ‘r1’% over FY 2012 • The company reported an operating margin of ‘r2’% in FY 2013, an increase of ‘r3’ percentage points over FY 2012 • The company reported debt to equity ratio of ‘n1’ in FY 2013, a decrease of ‘r4’% over FY 2012
Key Financial Performance Indicators Market Capitalization (USD mn) Total Enterprise Value (USD mn) EPS (USD) PE Ratio (Absolute)
y-o-y change (2013-12)
2013
2012
2011
2010
Profitability Ratios Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets
Cost Ratios
• The company earned a net profit of USD ‘d’ in FY 2013, as compared to net profit of USD 48.4 mn in FY 2012
Indicators
Particulars
Value (29/09/2014)
Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales)
Liquidity Ratios Current Ratio Cash Ratio
Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio
Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover Improved
FURNITURE MARKET IN CHINA 2014.PPT
Decline
18
Public: Company 1 (3/4) Key Business Segments
Key Geographic Segments
Segment 1
Segment 1
y6
y5 y4 y3 y2 y1
p1%
The company operates through single reportable segment, namely ‘Segment 1’
y3
y2
Segment 2 p3%
p4%
p1%
p2%
q1%
q2%
2010
2011
2012
2013
y1 2013
Business Highlights Description
News
Overview
• Company 1 was listed in ‘b1’ in ‘n1’ • The company holds prominent roles in several national industry bodies, such as Vice President of ‘o1’, ‘o2’ and ‘o3’
Operations
• Company 1 owns ‘n2’ forestry bases and ‘n3’ manufacturing units • The company operates over ‘n4’ retail outlets across the world • It manufactures ‘i1’ through the subsidiary ‘c1’ Note: Business Segments and Geographic Segments are based on total revenues FURNITURE MARKET IN CHINA 2014.PPT
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Public: Company 1 – SWOT Analysis (4/4)
S
W
O
T
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Private: Company 2 (1/3) Company Information
Locations – China
Corporate Address Tel No. Fax No.
Website Year of Incorporation
Products and Services Category
Headquarters Products/Services
H1
Key People Name
FURNITURE MARKET IN CHINA 2014.PPT
Designation
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Private: Company 2 (2/3) Business Highlights Description
News
Overview
• Company 2 is part of the Taiwan-based ‘g1’ • The company was founded in the year ‘n1’ • Its line of business includes ‘a1’ • The company sells its own products under the brand ‘b1’ and is also a supplier for American furniture brand ‘b2’
Operations
• ‘g1’ has manufacturing facilities in ‘c1’, ‘c2’ and ‘c3’ and sells its products in ‘c1’, ‘c4’, ‘c5’, ‘c6’ and ‘c7’, among other countries • Company 2 employs ‘n1’ people and is based in ‘a1’, ‘c1’ • In FY 2013, the company generated revenues of USD ‘n2’
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Private: Company 2 – SWOT Analysis (3/3)
S
W
O
T
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Mergers and Acquisitions (1/2) Announced Date
Closed Date
Transaction Type
Target
Buyer/Investors
Sellers
Deal Size (USD mn)
Note: Data for the years 2014, 2013 and 2012
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