Gree Appliances Conversely Expand: 2012 Sales Targets Across 100 Billion

When the home appliance industry encountered the “2012 winter”, Gree Electric Co., Ltd. made a converse.

On February 16th, Gree senior officials told reporters in Zhuhai that during the past 2011, Gree’s initial sales revenue exceeded 80 billion yuan. In 2012, Gree Electric Appliances will sprint sales revenue of over RMB 100 billion. In the next five years, Gree Electric Appliances will continue its current expansion rate and achieve an operating income of RMB 200 billion.

Gree Electric Appliances made the above statement in the context of the overall decline in the home appliance industry. According to data from the China Electronics and Video Association and Aowei Consulting, the domestic retail sales volume of the color TV industry increased slightly in 2011, but the amount of exports and total exports declined sharply.

According to statistics from China Yikang, the sales growth of domestic refrigerators and air conditioners has slowed down. From January to November 2011, the cumulative sales of refrigerators only increased by 3.54% year-on-year. It is worth noting that in Gree Electric's deep-pumped air-conditioning sector, cumulative industry sales fell 3.79% year-on-year in January-November 2011.

“The cold winter of the home appliance industry is indeed obvious, but it is an opportunity for Gree Electric to gain greater market share.” Zhu Jianghong, chairman of Gree Electric, said, “Because we have core technology, we have cotton jackets in the winter.”

Zhu Jianghong said that the overall household appliance industry may experience a 10% decline, and some companies may decline by 20%, but this is a good time for Gree Electric's contrarian expansion.

Contrarian expansion

According to an industry veteran, "Since last October, the ice-washing and even air-conditioning industries of home appliances have entered the period of stockpiling, among which ice-washed products are the hardest-hit areas for stocks. As of now, the operating rate of the industry is generally insufficient. The operating rate of the advantageous enterprises has barely reached the normal level."

This reality is that the outlook for the home appliance industry in 2012 is unclear. In addition, the state’s policy of encouraging home appliances to the countryside and eliminating the home appliances policy and the country’s strict control over the real estate industry have made the situation of the entire household appliance industry worse.

Within the industry, the home appliances giant, Midea Group, began to shrink its industrial structure. At the end of 2011, under the influence of export and other international factors as well as domestic sales, Midea Group reduced the number of its four major sales systems: refrigeration, NEC, HVAC, and electromechanical.

Against this background, Gree Electric Appliances is doing the opposite.

In mid-January 2012, Gree Electric Appliances issued a plan for the issuance of new shares, raising a total of about 3.2 billion yuan. The funds to be raised will be invested in the five projects of the headquarters of commercial air-conditioning technology expansion and expansion, Wuhan commercial air-conditioning construction, Zhengzhou home air-conditioning construction, annual output of 6 million new energy-saving and environmental protection household air-conditioning compressors, and energy-saving and environmentally-friendly refrigeration equipment engineering and technology research centers. .

On February 16, Zhu Jianghong said in an interview with this reporter that we had already formulated a plan to achieve sales revenue of over 100 billion yuan in 2012. Under current circumstances, this plan will not change. At the same time, in the five years after sales exceed 100 billion yuan, Gree's turnover will exceed 200 billion yuan, during which Gree Electric will achieve a compound annual growth of 20%.

When talking about the reasons for the bankruptcy in Hubei, Henan and other places, Zhu Jianghong said that Hubei, Henan and other provinces have huge sales, and the largest province has a sales scale of 10 billion yuan. If you do not build factories in the local area, and transport across regions, each region will consume tens of millions of yuan in annual logistics costs.

Ren Xuwei, dean of the China Household Electrical Appliances Research Institute, said that Gree Electric Appliances does have certain advantages in the field of air conditioning. As of the end of 2011, Gree's air-conditioning market share has accounted for 37% of the total sales of the industry, this figure is 10% higher than the second.

Argument for "specialization"

After formulating the mid-term target of RMB 200 billion, continuing to insist on professionalization or learning from the United States, TCL will diversify and become a problem that Gree Electric must solve.

In response to this, Zhu Jianghong said, “We had already considered this issue in about 2003. At that time, other home appliance companies were doing diversification. Our internal discussions were very fierce, but in the end we decided to stick to our professional thinking. One thing to do well."

The so-called specialization, vice president of Gree Electric Wang Jingdong said, in summary, Gree will extend the depth and breadth of the field of refrigeration. Specifically, in terms of breadth, Gree Electric will expand into more segments of the air-conditioning sector, such as expanding the R&D, production, and sales of commercial air conditioners. In depth, Gree Electric will explore existing core components and existing high-margin parts.

In fact, Gree has made efforts on the above-mentioned links. Zhu Jianghong disclosed that “Gree has developed all or some of its alternative products in important raw materials such as rare earth and copper in air-conditioning manufacturing. Moreover, these products using alternative materials have been successfully sold in foreign markets”.

Zhu Jianghong said that we will stick to the leading technology. In the market, the theory of “homogenization” of the air-conditioning industry has been circulated. I think this is an act by which individual companies do not seek technological innovation and only fight price 忽悠. In addition, he said that Gree will increase the development of foreign markets, in the future, Gree will consider building factories in Southeast Asia and South Asia to achieve local manufacturing.