From its inception in 1990 to becoming the leader in the Chinese printing and packaging industry, Brilliant Circle Holdings International Limited (the “Company”) has always adhered to the business philosophy of being united and pragmatic, while promoting gratitude, heritage, innovation and development as its corporate ideologies. The Company has firmly grasped the business opportunity presented as a result of China’s rapid economic growth. The Company has strived to expand its reach in China as well as globally to ensure healthy growth in revenue, continual provision of value-added services to its customers and tireless pursuit of increase in shareholder value. At the same time, the Company is also adamant in exploring new methodologies to expand the industry as a whole in areas such as: operating model, internal management and technical innovation.
On 22 December 2015, Office of the State Council issued 《關於做好2015年底和2016年初行業運行調控工作的通知》 (State Tobacco Circular 2015 No. 368) stipulates that the state objective for 2016 is to reduce the accumulation of inventory through promotion, decreasing production, enhancing brand building and adjusting the state of the market by means of production by order and co-production. As China has entered into the “new normal”, economic growth is heading into a period of low-medium growth. The tobacco industry is set for further brand consolidation. In 2016, tobacco industry is likely to face challenges arisen from the accumulation of inventory, the changing eco-system of cigarette industry and downward pressure from the macro economy. To change and adapt to the new economy, the Company has followed the industrial development trend by improving its competitive strengths on technology and innovation under the guiding principles of “consolidation, upgrade and transformation”, in particular investing in digitization, intelligence production, plant automation and internet connectivity of products for expanding the value chain. Foreseeing the challenges aheads the Group adopted the following strategies.
Transformation from traditional printing oriented business to the provision of all-in-one solution in the tobacco industry
Leveraging on the Group tobacco package printing and research and development experience, to strengthen our market position as one of the leading cigarette packages printing companies in the PRC, aside from the traditional printing service, the Group set to position itself as a prominent player in the PRC cigarette supply chain to provide an all-in one solution to the China National Tobacco Corporation (“CNTC”) customers encompassing collection of relevant market data, proactively research on new packaging material and technique, procurement of material, production of package and sales of cigarette. Working closely with the CNTC customers with an aim to induce further demand and assist brand enhancement and differentiation in the market.
In the 2nd half of 2015, the commencement of QR Code printing refer to as “One Pack, One Code” on the cigarette pack for the CNTC customers embarks the first step in the Group’s roadmap for the construction of O2O platform for CNTC and retail shop network that sells cigarettes. Leveraging on the resources of China Tobacco Guangxi Industrial Co. Ltd, our joint venture partner for the O2O business, we will manage the QR Code system and O2O platform from code origination, proofread, management for QR Code to operation of non-cigarette online sales. The data collected from the O2O platform enables us to engage in Big Data and competition planning, and sales analysis, which will help us to assist the CNTC customers more efficiently. Such platform also enables CNTC customers to procure market data in a timely manner for various marketing campaign and enables the Group tap into e-commerce and m-commerce. Target market will initially be the near provinces where our Group has operation in.
Striving for expansion into non-cigarette industry field
Considering the matured tobacco packaging industry is limited in growth catalysts, it is the Group’s strategy to decrease the reliance on cigarette packaging printing business and to diversify into non-cigarette packaging. Furthermore, by self-developing own packaging solution or technique or by subcontracting with other consumer products, revenue base can be enhanced. With the commencement of the Anhui Technology Park, it is aimed to become a pilot site for the Group’s non-cigarette packaging business. The Group will from time to time strive to take the technological and cost advantage of Anhui Technology Park to identify suitable non-cigarette packaging business to enhance the performance of the Group.
It is the Group’s corporate mission to continue to explore ways to improve its financial performance, to equip the Group with growth momentum, to diversify its operations internationally into new and more profitable businesses and to broaden the sources of revenue within acceptable risk level. Hence, the Company does not rule out the possibility of investing in or diversifying into other profitable business as long as it is in the interest of the Company and the Shareholders as a whole. Also, as part of its routine exercise, the Company reviews the performance of its existing investment portfolio and evaluates the investment potentials of other investment opportunities available to the Company from time to time. Subject to the results of such reviews, the Company may make suitable investment decisions according to the then circumstance and information available which may involve the change of the asset allocation of its investment portfolio and/or expanding its investment with a view of realising and/or optimising the expected return and minimising the risks. Meanwhile, the Company does not preclude the possibility that the Company may implement debt and/or equity fund raising plan(s) to satisfy the financing needs arising out of any business development of the Group as well as to improve its financial position in the event that suitable fund raising opportunities arise, as the Company has from time to time been approached by investors for potential investment projects. Notwithstanding the Group’s intention to explore any potential new business(es), it is the firm intention of the Group to strive to further develop its principal business of cigarette packages printing and manufacturing of laminated paper in the PRC.
Embrace “Made in China 2025” strategy
As stated in the “13th Five-Year Plan”, China will implement more stringent requirement for green manufacture initiatives, including encouraging upgrade of production facility, transformation into high-technology production technique. To this end, and the Group formed a joint venture with Tianjin Rongcai Technology Co., Ltd, a non wholly-owned subsidiary of Masterwork Machinery Company Limited in December 2015 to develop intelligent and environmental-friendly facilities for the tobacco packaging industry. The first of such prototype production line for cigarette package printing is expected to be ready in the Group’s Shenzhen production facility in 2016.
It is also the intention for the Group to engage in research, development and sales of intelligent automated packaging solution which can then provide the solution to different printing and packaging industry through the joint venture to broaden the Group’s income source. The Group will also invest resource in developing its own intelligent property relating to printing and packaging business. With the completion of our Anhui Technology Park in the fourth quarter of 2015, it has equipped with large scale automation production facilities along with a new tobacco research centre capable of developing new packaging product and solution including but not limited to those in collaboration with the Group’s CNTC customers. As part of further utilizing our application of QR Code in operation, after the upgrade of our enterprise resource planning system, the Group is now capable of using QR code as a control tool starting from the procurement cycle to sales cycle to strengthen corporate efficiency, reduce lead time and increase competitiveness.
Synergetic co-operations and developments
Having a well established foundation and position knowing the challenges and obstacles ahead, the Group will strive to explore opportunities for strategic and synergetic collaboration, including but not limited to merger and acquisition, forming of joint ventures and/or strategic diversification and/or other corporate action in the future should they be in the interest of the Company and its shareholders as a whole.
With a long operating history and a sound financial position, the Group is set to overcome the challenge and obstacles brought by the changing eco-system of the industry and macro-economy by positioning itself as a “Printing + Internet + Value” enterprise which integrate our core printing and packaging competence with the strategic use of internet, O2O, to transform ourselves to an all-in-one service provider, amid the PRC economy transitional period to generate high value added service to our stakeholders, to achieve win-win result and to be geared with growth drivers.
On behalf of the Group, I would like to take this opportunity to express my gratitude to our customer and shareholders for their continuing support, my fellow directors for their guidance as well as our staff for their dedication and hard work.
Cai Xiao Ming, David
24 March 2016